The credit analyst for Mazibuko Limited has established the following data relating to the working capital cycle of the firm: Credit payment period for raw materials 30 days Raw material delivery to completed goods 50 days Debtors collection period 80 days Completed goods to credit sales 20 days Required: Calculate the following: 3.1.1 The cash conversion cycle 3.1.2 The period during which financing will be required 3.1.3 Discuss four measures that can be implemented to reduce the period for which financing is required

The credit analyst for Mazibuko Limited has established the following data relating to the working capital cycle of the firm: Credit payment period for raw materials 30 days Raw material delivery to completed goods 50 days Debtors collection period 80 days Completed goods to credit sales 20 days Required: Calculate the following: 3.1.1 The cash conversion cycle 3.1.2 The period during which financing will be required 3.1.3 Discuss four measures that can be implemented to reduce the period for which financing is required

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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2
A firm has arranged for a lockbox system to reduce collection time of accounts receivable. Currently the firm has an average collection period of 43 days, an average age of inventory of 50 days, and an average payment period of 10 days. The lockbox system will reduce the average collection period by three days by reducing processing, mail, and clearing float. The firm has total annual outlays of $15,000,000 and currently pays 9 percent for its negotiated financing. A. Calculate the cash conversion cycle before the lockbox system B. Calculate the cash conversion cycle after the lockbox system C.
) Prince Edward Bank considers increasing a type of loans in the credit portfolio by $3,500,000,which will generate a gross income of 2.5%p.a. The bank assumes PD is 10% and estimates LGDis 20% and EAD as 80%. The net income, which is gross income minus Expected Loss (i.e. EL),will be used in the RAROC analysis. When doing so, the Bank refers to the net income andunexpected loss (i.e. UL) as the capital-as-risk estimation.Required:If the ROE of Prince Edward Bank is targeted at 25%, analyze whether the loans could be addedto the portfolio by RARoC analysis
Thankyou for answering the first half of the question can you please solve the last reminding subpart which is B) the project payback period for Project B and state which project is preferred according to the method and question C )
(Related to Checkpoint 18.2) (Estimating the cost of bank credit) Paymaster Enterprises has arranged to finance its seasonal working-capital needs with a short-term bank loan. The loan will carry a rate of 14 percent per annum with interest paid in advance (discounted). In addition, Paymaster must maintain a minimum demand deposit with the bank of 10 percent of the loan balance throughout the term of the loan. If Paymaster plans to borrow $90,000 for a period of 6 months, what is the annualized cost of the bank loan? The annualized cost of the bank loan is %. (Round to two decimal places.)
The Mitchem Marble company has a target current ratio of 2.2 but has experienced some difficulties financing its expanding sales in the past few months. At present the firm has a current ratio of 2.9 and current assests of $2.62 million. If Mitchem expands its receivables and inventories using its short-term line of credit, how much additional short-term funding can it borrow before its current ratio standard is reached? The additional amount of receivables and inventories (short term debt) is how many million? (rounded to two decimal places)
Problem C: Effective Cost of Trade Payables:ABC has a major supplier that offers a credit term of 2/15, n/60. Cash can be temporarily invested for a return of 3%.Required: Compute for the effective rate of the payable for each of the following independent cases:
AB Borda shall establish a risk-adjusted required rate of return as part of their investment analysis. The company has produced the following information: • The investment will be financed to 40% with bank loans and 60% with equity • The company's tax rate is 22% • The government bond for the intended investment period has an interest rate corresponding to 2% • The company has negotiated with the bank for a loan for the investment with an interest rate of 5%. • For the investment period, the company has an expectation that the index for the market portfolio will increase from the current 110 to 119.9 at the end of the investment period. • The company's intended investment has a covariance with a market portfolio of 120 and that the standard deviation for the market portfolio is 7.56. a) Calculate the company's nationally adjusted return requirement for the investment.
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A firm with seasonal sales would probably select which of the following types of loans from a bank to fund the need for a fixed amount of additional capital during the season of peak demand? a. Term loan b. Installment long-term loan c. Long-term transaction loan d. Unsecured short-term loan
The Emu Manufacturing Company is considering five independent investment opportunities. The required investment outlays and expected internal rates of return (IRR) for these investments are shown below. The firm's cost of capital is 14% and its target optimal capital structure is a debt ratio of 30%. Internally generated funds totalling $900,000 are available for all investment opportunities. (i) Based on the IRR method, which investment(s) should be accepted? (ii) If the company were to undertake all acceptable investments, what amount should be paid out in dividends according to the residual dividend policy? (iii) What would be the amount of external finance required if the company were to undertake all acceptable investments?
A company manager is faced with an investment proposal of Rp. 100,000,000, - with a period of 4 years and cash inflows every year as follows: Year 1 Rp. 40,000,000 Year 2 Rp. 30,000,000 Year 3 Rp. 30,000,000 Year 4 Rp. 20,000,000 Requested: a. With an interest rate of 12%, with the NPV and PI method, assist the manager in making decisions. Whether the project is accepted or rejected. b. If it is known that the second interest rate is 20% and the cost of capital offered is 17%, calculate the IRR, and make a decision whether to accept or reject the project.

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