A company is launching a new sales initiative and expects sales of $824,241 during the first year, and the gross profit margin to be 12%. To prepare for this, they plan to acquire 74 days worth of inventory. Their vendor will allow 36 days to pay its invoices. The company plans to sell only on account to its customers, so sales will be entirely credit based, and the average invoice is expected to take 42 days to collect. The company expects sales, costs and net working capital to grow 7.0% per year. What will be the incremental investment in operating net working capital for year 1? Enter your answer as a monetary amount rounded to four decimal places, but without the currency symbol. For example, if your answer is $90.1234, enter 90.1234 Type your answer.....

A company is launching a new sales initiative and expects sales of $824,241 during the first year, and the gross profit margin to be 12%. To prepare for this, they plan to acquire 74 days worth of inventory. Their vendor will allow 36 days to pay its invoices. The company plans to sell only on account to its customers, so sales will be entirely credit based, and the average invoice is expected to take 42 days to collect. The company expects sales, costs and net working capital to grow 7.0% per year. What will be the incremental investment in operating net working capital for year 1? Enter your answer as a monetary amount rounded to four decimal places, but without the currency symbol. For example, if your answer is $90.1234, enter 90.1234 Type your answer.....

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Lane Products manufactures a popular kitchen utensil. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It opened negotiations with the local bank for a one-month loan of $56,000 starting March 1. The bank would charge interest at the rate of 0.5 percent per month and require the company to repay interest and principal on March 31. In considering the loan, the bank requested a projected income statement and cash budget for March. The following information is available: . The company budgeted sales at 20,000 units per month in February, April, and May and at 17,000 units in March. The selling price is $68 per unit. The company offers a 2 percent discount for cash sales. The company's experience is that bad debts average 1 percent of credit sales. The inventory of finished goods on February 1 was 3,200 units. The desired finished goods inventory at the end of each month equals 25 percent of sales anticipated for the…
Jayden's Carryout Stores has eight locations. The firm wishes to expand by two more stores and needs a bank loan to do this. Mrs. Wilson, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. The following are actual and forecast sales figures: Actual Forecast November December $460,000 January 480,000 February March Additional Information $540,000 April forecast $470,000 580,000 480,000 Of the firm's sales, 50 percent are for cash and the remaining 50 percent are on credit. Of credit sales, 35 percent are paid in the month after sale and 65 percent are paid in the second month after the sale. Materials cost 40 percent of sales and are purchased and received each month in an amount sufficient to cover the following month's expected sales. Materials are paid for in the month after they are received. Labor expense is 35 percent of sales and is paid for in the month of sales. Selling and administrative expense is…
the second quarter of 2021: Credit sales Credit purchases Cash disbursements Wages, taxes, and expenses Interest Equipment purchases Beginning cash balance Cash receipts Cash collections from credit sales Total cash available Cash disbursements The company predicts that 5 percent of its credit sales will never be collected, 30 percent of its sales will be collected in the month of the sale, and the remaining 65 percent will be collected in the following month. Credit purchases will be paid in the month following the purchase. Purchases Wages, taxes, and expenses Interest In March 2021, credit sales were $190,000 and credit purchases were $130,000. Using this information, complete the following cash budget: (Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required.) Equipment purchases April May June $320,000 $300,000 $360,000 128,000 151,000 176,000 Total cash disbursements 44,000 11,000 80,000 Ending cash balance 11,500 11,000 150,000 $…
The Cowboy Bottling Company will generate $16 million in credit sales next year. Collection of these credit sales will occur evenly over this period. The firm's employees work 300 days a year. Currently, the firm's processing system ties up 6 days' worth of remittance checks. A recent report from a financial consultant indicated procedures that will enable Cowboy Bottling to reduce processing float by 2 full days. If Cowboy invests the released funds to earn 6 percent, what will be the annual savings?
They collect rent revenue of $20 sf/yr for WalMart ( 100,000 sf) since it is an anchor store. They charge BestBuy $25sf/yr( 70,000 sf) plus 10% of sales that exceeds $200 sf/yr. Sales in the first year of BestBuy is expected to be $160 sq/ft and growing at 6% per year. The boutique store( 30,000 sf) is charged $23 sf/yr plus 10% for sales that exceeds $100 sf/yr. Sales for the boutique store in year 1 is $105 sf/yr and is expected to grow at 4% per year. Calculate the gross potential rental revenue for these three tenants. Thank you.
Suppose that the Sales in December 2019 were 26,630. The sales are expected to grow by 7% in January 2020, by 5% in February 2020, and by 5% in March 2020. After that, the sales are expected to grow by 11%. The company's cash collection is as follows: 71% is collected in the same month and the remainder in the next month. What is the cash collection for July, 2020?
Lane Products manufactures a popular kitchen utensil. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It opened negotiations with the local bank for a one-month loan of $56,000 starting March 1. The bank would charge interest at the rate of 0.5 percent per month and require the company to repay interest and principal on March 31. In considering the loan, the bank requested a projected income statement and cash budget for March. The following information is available: . The company budgeted sales at 20,000 units per month in February, April, and May and at 17,000 units in March. The selling price is $68 per unit. The company offers a 2 percent discount for cash sales. The company's experience is that bad debts average 1 percent of credit sales. The inventory of finished goods on February 1 was 3,200 units. The desired finished goods inventory at the end of each month equals 25 percent of sales anticipated for the…
Currently, OET Corporation sells 350,000 units of widgets a month at a price of $21 a unit. The company currently has a net 30 credit policy. Mr. Ent, the company's financial manager, is evaluating a new credit policy of net 60 for the company. The marketing manager thinks that sales would increase by 10,000 units per month if the company were to switch to the new credit policy. The APR for OET is 13% compounded monthly, and its variable cost per widget is $12. Ignore taxes. Tomorrow, Mr. Ent will be making a presentation on the new proposed credit policy to the CEO of OET. He will be expected to provide answers to the following questions. As another alternative, suppose the company offers a credit policy of 3/10, net 60. The periodic rate based on this new credit policy is © а. 13.00% O b. 3.09% O c. 10.00% O d. 3.00% O e. 6.09%
The beginning cash balance is $18,000. Sales are forecasted at $860,000 of which 80% will be on account. Seventy percent of credit sales are expected to be collected in the year of sale. Cash expenditures for the year are forecasted at $475,000. Accounts Receivable from previous accounting periods totaling $11,300 will be collected in the current year. The company is required to make a $14,000 loan payment and an annual interest payment on the last day of every year. The loan balance as of the beginning of the year is $95,000, and the annual interest rate is 8%. Compute the excess of available cash over cash disbursements. Excess of available cash over cash disbursements $
Lane Products manufactures a popular kitchen utensil. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It opened negotiations with the local bank for a one-month loan of $40,000 starting March 1. The bank would charge interest at the rate of 0.5 percent per month and require the company to repay interest and principal on March 31. In considering the loan, the bank requested a projected income statement and cash budget for March. The following information is available: The company budgeted sales at 12,000 units per month in February, April, and May and at 9,000 units in March. The selling price is $60 per unit. The company offers a 2 percent discount for cash sales. The company's experience is that bad debts average 1 percent of credit sales. The inventory of finished goods on February 1 was 2,400 units. The desired finished goods inventory at the end of each month equals 25 percent of sales anticipated for the…
Currently, OET Corporation sells 350,000 units of widgets a month at a price of $ 21 a unit. The company currently has a net 30 credit policy. Mr. Ent, the company's financial manager, is evaluating a new credit policy of net 60 for the company. The marketing manager thinks that sales would increase by 10,000 units per month if the company were to switch to the new credit policy. The APR for OET is 13% compounded monthly, and its variable cost per widget is $12. Ignore taxes. Tomorrow, Mr. Ent will be making a presentation on the new proposed credit policy to the CEO of OET. He will be expected to provide answers to the following questions. The net present value of the proposed credit policy switch is O a. $837,692.31 O b. 5437.295.90 O c. $783,926.13 O d. $592,032.32 O e. $639,284.55

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