78.
Stellar Shoes would like to maintain their cash account at a minimum level of $25,000, but
expects the standard deviation in net daily cash flows to be $2,000; the effective annual
rate on marketable securities to be 5 percent per year; and the trading cost per sale or
purchase of marketable securities to be $100 per transaction. What will be their optimal
upper cash limit?
79.
Joe’s Burgers would like to maintain their cash account at a minimum level of $300,000,
but expects the standard deviation in net daily cash flows to be $20,000; the effective
annual rate on marketable securities to be 5.2 percent per year; and the trading cost per
sale or purchase of marketable securities to be $22.55 per transaction. What will be their
optimal upper cash limit?
80.
JohnBoy Industries has a cash balance of $59,000; accounts payable of $139,000;
inventory of $115,000; accounts receivable of $220,000; notes payable of $175,000; and
accrued wages and taxes of $23,000. How much net working capital does the firm need to
fund?
81.
Dandee Lions, Inc. has a cash balance of $105,000; accounts payable of $290,000;
inventory of $213,000; accounts receivable of $310,000; notes payable of $95,000; and
accrued wages and taxes of $65,000. How much net working capital does the firm need to
fund?
82.
If a firm has a cash cycle of 71 days and an operating cycle of 139 days, what is its
average payment period?
83.
If a firm has a cash cycle of 75 days and an operating cycle of 120 days, what is its
payables turnover?
84.
If a firm has a cash cycle of 41 days and an operating cycle of 76 days, what is its average
payment period?
85.
If a firm has a cash cycle of 38 days and an operating cycle of 82 days, what is its payables
turnover?
86.
What must the rate be less than to be worth it to incur a compensating balance of $20,000
in order to get a 2 percent lower interest rate on a one-year, pure discount loan of
$200,000?
87.
CM Enterprises estimates that it takes, on average, seven days for their customers’
payments to reach them, one day for the payments to be processed and deposited by their
bookkeeping department, and three more days for the check to clear once they’re
deposited. What is their collection float?
88.
B&B Cos. has sales of $732,000 and cost of goods sold of $323,000. The firm had a
beginning inventory of $48,000 and an ending inventory of $39,000. What is the length of
the days’ sales in inventory?
89.
Suppose that Dunn Industries has annual sales of $2.5 million, cost of goods sold of
$1,850,000, average inventories of $1,900,000, and average accounts receivable of
$660,000. Assuming that all of Dunn’s sales are on credit, what will be the firm’s operating
cycle?
90.
Suppose that LilyMac Photography has annual sales of $218,000, cost of goods sold of
$123,000, average inventories of $1,250, and average accounts receivable of $22,000.
Assuming that all of LilyMac’s sales are on credit, what will be the firm’s operating cycle?
91.
Suppose that LilyMac Photography has annual sales of $290,000; cost of goods sold of
$155,000; average inventories of $3,500; average accounts receivable of $21,000; and an
average accounts payable balance of $10,000. Assuming that all of LilyMac’s sales are on
credit, what will be the firm’s cash cycle?
92.
Suppose your firm is seeking a seven-year, amortizing $400,000 loan with annual
payments and your bank is offering you the choice between a $410,000 loan with a
$10,000 compensating balance and a $400,000 loan without a compensating balance. If
the interest rate on the $400,000 loan is 9.5 percent, how low would the interest rate on
the loan with the compensating balance have to be in order for you to choose it?
93.
Rose Axels faces a smooth annual demand for cash of $8 million; incurs transaction costs
of $200 every time they sell marketable securities; and can earn 3.8 percent on their
marketable securities. What will be their optimal cash replenishment level?
94.
HotFoot Shoes would like to maintain their cash account at a minimum level of $35,000,
but expect the standard deviation in net daily cash flows to be $2,000; the effective annual
rate on marketable securities to be 5 percent per year; and the trading cost per sale or
purchase of marketable securities to be $210 per transaction. What will be their optimal
cash return point?
95.
Betty Boop has saved enough money to go back to grad school. She is planning to put the
money in a money market account where it will earn 2.5 percent. If she anticipates slowly
drawing the money out over the course of her time in grad school at a constant rate of
$29,000 per year, but is charged a commission of $7.95 every time she sells shares, how
much should she take out of the mutual fund at a time?
96.
What effect does increasing the standard deviation in daily cash flows have on the cash
return point in the Miller-Orr model?
97.
What effect does decreasing the standard deviation in daily cash flows have on the cash
return point in the Miller-Orr model?
98.
Which of the following actions will cause a firm’s net working capital to increase?
99.
Which of the following actions will cause a firm’s net working capital to decrease?
100.
Imagine a firm has a temporary surplus of cash meant to fund an expansion project in the
next nine months. Which of the following statements is correct?
101.
Why do firms offer customers discounts for paying early?
102.
What is the difference between a lockbox system and concentration banking?