Problem No. 1 Cash Conversion CycleChastain Corporation is trying to determine the effect of its inventory turnover ratio and dayssales outstanding (DSO) on its cash conversion cycle. Chastain's 2016 sales (all on credit) were$204000; its cost of goods sold is 80% of sales; and it earned a net profit of 5%, or $10200. Itturned over its inventory 5 times during the year, and its DSO was 35.5 days. The firm had fixedassets totaling $50000. Chastain's payables deferral period is 45 days. Assume 365 days inyear for your calculations. The data has been collected in the Microsoft Excel Online file below.Open the spreadsheet and perform the required analysis to answer the questions below.a. Calculate Chastain's cash conversion cycle. Round your answer to two decimal places.Do not round intermediate calculations.b. Assuming Chastain holds negligible amounts of cash and marketable securities,calculate its total assets turnover and ROA. Round your answers to two decimal places.Do not round intermediate calculations.c. Suppose Chastain's managers believe that the inventory turnover can be raised to 8.1times. What would Chastain's cash conversion cycle, total assets turnover, and ROAhave been if the inventory turnover had been 8.1 for 2016? Round your answers to twodecimal places. Do not round intermediate calculations. 1 Cash conversion cycle23Sales4 Cost of good sold%5 Net profit margin678310Original Inventory turnover ratioDSOFixed assetsPayables deferral period11 Calculate inventory conversion period:12 Inventory13 Inventory conversion period (days)1415161718Calculate cash conversion cycle:Cash conversion cycle (daya)13 Accounts receivable20 Total apot21 Total assets turnover22Calculate total assets turnover:31 Inventory conversion period (days)32$204,00080.00%5.00%535.5$50,0004523 Calculate return on assets:24 Not income25 Return on appeto (ROA)2627 Revised inventory turnover ratio2823 Calculate inventory conversion period:30 Inventory3334 Cash conversion cycle (days)3536 Calculate total assets turnover:37 Accounts receivable38 Total assets394041Calculate cash conversion cycle:Total appeto turnoverBCalculate return on assets:42 Not income43 Return on at (ROA)44458.1сDEFG

Answered: Chastain Corporation is trying to…

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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For 2018, Bargain Basement Stores reported $11,500 of sales and $5,000 of operating costs (including depreciation). The company has $20,500 of total invested capital, the weighted average cost of that capital (the WACC) was 8%, and the federal-plus-state income tax rate was 40%. What was the firm's Economic Value Added (EVA), i.e., how much value did management add to stockholders' wealth during 2017?
The Brenmar Sales Company had a gross profit margin (gross profits÷sales) of 34 percent and sales of $9.2 million last year. 73 percent of the firm's sales are on credit, and the remainder are cash sales. Brenmar's current assets equal $1.2 million, its current liabilities equal $300,700, and it has $109,000 in cash plus marketable securities. a. If Brenmar's accounts receivable equal $562,900, what is its average collection period? b. If Brenmar reduces its average collection period to 25 days, what will be its new level of accounts receivable? c. Brenmar's inventory turnover ratio is 9.3 times. What is the level of Brenmar's inventories?
The Pharoah Company has disclosed the following financial information in its annual reports for the period ending March 31, 2017: sales of $1.416 million, cost of goods sold of $815,000, depreciation expenses of $175,000, and interest expenses of $89,575. Assume that the firm has an average tax rate of 35 percent. Compute the cash flows to investors from operating activity. (Round answer to 2 decimal places, e.g. 15.25.) Cash flow from operating activity %24
Quantitative Problem: Winston Inc. is trying to determine the effect of its inventory turnover ratio and days sales outstanding on its cash conversion cycle. Winston's 2015 sales (all on credit) were $123,000 and its cost of goods sold was 75% of sales. It turned over its inventory 8.52 times during the year. Its receivables balance at the end of the year was $13,118.63 and its payables balance at the end of the year was $7,390.82. Using this information calculate the firm's cash conversion cycle. Do not intermediate calculations. Round your answer to the nearest whole number. days
(Related to Checkpoint 11.1) (Net present value calculation) Dowling Sportswear is considering building a new factory to produce aluminum baseball bats. This project would require an initial cash outlay of $4,000,000 and would generate annual net cash inflows of $1,100,000 per year for 6 years. Calculate the project's NPV using a discount rate of 5 percent. *** If the discount rate is 5 percent, then the project's NPV is $. (Round to the nearest dollar.)
W. F. Bailey Company had a quick ratio of 1.4, a current ratio of 3.0, an inven-tory turnover of five times, total current assets of $810,000, and cash andequivalents of $120,000 in 2015. If the cost of goods sold equaled 80 percent ofsales, what were Bailey’s annual sales and DSO?
On its second year of operations, Victorias Co. thought of expanding its business. In order to generate additional cash necessary for this expansion, the company on September 1, 2009, factored P200,000 of accounts receivable to Escalante Finance Co. Factoring fee was 10% of the receivables purchased. The Finance Co. with-held 5% of the purchase price as protection against sales returns and allowances. On November 2, 2009, accounts receivable amounting to P500,000 was assigned to La Carlota Bank as collateral on P300,000, 20% annual interest rate loan. A 3% finance charge was deducted in advance. As of December 31, 2009, data relating to accounts receivable follows: Allowance for doubtful accounts – P6,700 (credit) Estimated uncollectibles – 2% of accounts receivable Accounts receivable excluding factored and assigned accounts – P95,000 Collections on assigned accounts – none The total cash generated from factoring and assigning the accounts receivable was A. P402,000 B.…
Last year, Hassan’s Madhatter, Inc. had an ROA of 5.8 percent, a profit margin of 18.50 percent, and sales of $10 million. Calculate Hassan’s Madhatter’s total assets. (Enter your answer in dollars, rounded to the nearest dollar.)
Schwert Corp. shows the following information on its 2015 income statement: Sales = $215,000; COGS= $117,000; o Other operating expenses excluding Depreciation = $6,700; Depreciation expense=$18,400; Interest Expense=$10,000; Taxes = $25,370; Dividends =$9,500. Change in the cash balance from 2014 to 2015 is +$2,000. In addition, you're told that the firm issued $8,100 in new equity during 2015 and redeemed $7,200 in outstanding long-term debt. d. How much cash did Schwert generate from its operations? WCR = Working capital requirement Parts a-c were already posted and answered, just need d
The Booth Company's sales are forecasted to double from $1,000 in 2016 to $2,000 in 2017. Here is the December 31, 2016, balance sheet: Cash Accounts payable Accounts receivable Notes payable Inventories Accruals Net fixed assets Long-term debt Common stock Retained earnings Total liabilities and equity $50 150 50 400 100 250 Total assets $1000 $1000 Booth's fixed assets were used to only 50% of capacity during 2016, but its current assets were at their proper levels in relation to sales. All assets except fixed assets must increase at the same rate as sales, and fixed assets would also have to increase at the same rate if the current excess capacity did not exist. Booth's after-tax profit margin is forecasted to be 5% and its payout ratio to be 50%. What is Booth's additional funds needed (AFN) for the coming year? Round your answer to the nearest dollar. $ $ 100 200 200 500 360
The Pharoah Company has disclosed the following financial information in its annual reports for the period ending March 31, 2017: sales of $1.416 million, cost of goods sold of $815,000, depreciation expenses of $175,000, and interest expenses of $89,575. Assume that the firm has an average tax rate of 35 percent. Compute the cash flows to investors from operating activity. (Round answer to 2 decimal places, eg. 15.25.) Cash flow from operating activity 24
Suppose the 2022 income statement for McDonald's Corporation shows cost of goods sold $4,878.8 million and operating expenses (including depreciation expense of $1,226.0 million) $10,671.1 million. The comparative balance sheets for the year show that inventory decreased $7.4 million, prepaid expenses increased $43.4 million, accounts payable (inventory suppliers) increased $19.1 million, and accrued expenses payable increased $195.8 million. Using the direct method, compute (a) cash payments to suppliers and (b) cash payments for operating expenses. (Enter answers in millions to 1 decimal place, e.g. 527.5.) Cash payments to suppliers $ Cash payments for operating expenses $ million million

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