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Working capital investment
CDL Corporation produces motorcycle batteries. CDL turns out 1,500 batteries a day at a cost of $5 per battery for materials and labor. It takes the firm 24 days to convert raw materials into a battery. CDL allows its customers 40 days in which to pay for the batteries, and the firm generally pays its suppliers in 30 days. Assume 365 days in year for your calculations.
CDL management is trying to analyze the effect of a proposed new production process on its working capital investment. The new production process would allow CDL to decrease its inventory conversion period to 15 days and to increase its daily production to 2,000 batteries. However, the new process would cause the cost of materials and labor to increase to $11. Assuming the change does not affect the average collection period (40 days) or the payables deferral period (30 days), what will be the length of its cash conversion cycle and its working capital financing requirement if the new production process is implemented? Round your answers to two decimal places.
The material in this module shows that many companies place disproportionate emphasis on the financial perspective at the costs of the other three perspectives.
You've determined the profitability of a planned project by finding the present value of all the cash flow from that project. Which of the following would cause the project to look less appealing, that is, have a lower present value?
The spot exchange rate is £0.70, and the three-month forward rate is £0.71. Ignoring transaction costs, in which country would the treasurer want to invest the company's funds? Why?
How much must she save each year at the end of years 21 through 35 to obtain her goal? Assume that the average rate of return over the entire period will be 10%. Please show all work.
include depreciation and working capital in the following NPV analysis, because depreciation for the machinery goes for longer than the project timeline, and working capital needs to be accounted for as a percentage of sales.
What is the break-even level of earnings before interest and taxes between these two capital structure options?
What is time value of money? Why is it important in finance? Discuss about different types of time value of money problems.
A proposed project can generate savings of $1000 per year for ten years. The initial cost of the project is $2500 and the project has a salvage value of $500 in the 10th year.
Determine which of the following would least likely be considered as signaling a potential problem regarding the "quality of earnings" for a firm?
The project will require $2,000 of net working capital, which is recoverable at the end of the project. What is the internal rate of return on this project at a tax rate of 34 percent?
What were the total dividends paid to shareholders during the most recent year?
If the appropriate interest rate is 13 percent, what kind of deal did the player snag? Assume all payments are paid at the end of the year.
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