Silverstone Distributors Inc. carries an average annual inventory of $6 million. If it estimates the cost of capital at 10%, storage costs at 7%, and risk costs at 6%, what does it cost per year to carry this inventory?

Silverstone Distributors Inc. carries an average annual inventory of $6 million. If it estimates the cost of capital at 10%, storage costs at 7%, and risk costs at 6%, what does it cost per year to carry this inventory?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 11P: Negus Enterprises has an inventory conversion period of 50 days, an average collection period of 35...

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Question

I need help with this general accounting question using standard accounting techniques.

Silverstone Distributors Inc. carries an average annual
inventory of $6 million. If it estimates the cost of capital at
10%, storage costs at 7%, and risk costs at 6%, what does it cost
per year to carry this inventory?

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