motorcycle Prestopino batteries. Prestopino turns out 1,500 batteries a day Corporation produces at a cost of $6 per battery for materials and labor. It takes the firm 22 days to convert raw materials into a battery. Prestopino allows its customers 40 days in which to pay for the batteries, and the firm generally pays its suppliers in 30 days. a. What is the length of Prestopino's cash conversion cycle? b. At a steady state in which Prestopino produces 1,500 batteries a day, what amount of working capital must it finance? c. By what amount could Prestopino reduce its working capital financing needs if it was able to stretch its payables deferral period to 35 days?
motorcycle Prestopino batteries. Prestopino turns out 1,500 batteries a day Corporation produces at a cost of $6 per battery for materials and labor. It takes the firm 22 days to convert raw materials into a battery. Prestopino allows its customers 40 days in which to pay for the batteries, and the firm generally pays its suppliers in 30 days. a. What is the length of Prestopino's cash conversion cycle? b. At a steady state in which Prestopino produces 1,500 batteries a day, what amount of working capital must it finance? c. By what amount could Prestopino reduce its working capital financing needs if it was able to stretch its payables deferral period to 35 days?
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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Transcribed Image Text:Prestopino
Corporation
produces
motorcycle
batteries. Prestopino turns out 1,500 batteries a day
at a cost of $6 per battery for materials and labor. It
takes the firm 22 days to convert raw materials into a
battery. Prestopino allows its customers 40 days in
which to pay for the batteries, and the firm generally
pays its suppliers in 30 days.
a. What is the length of Prestopino's cash conversion
cycle?
b. At a steady state in which Prestopino produces
1,500 batteries a day, what amount of working capital
must it finance?
c. By what amount could Prestopino reduce its
working capital financing needs if it was able to
stretch its payables deferral period to 35 days?
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