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55. 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 checks to clear once they're deposited.
What is their collection float?
56. PBJ Enterprises estimates that it takes, on average, three days for their customers'
payments to reach them, three days for the payments to be processed and deposited by their
bookkeeping department, and three more days for the checks to clear once they're deposited.
What is their collection float?
57. B&O Cos. has sales of $850,000 and cost of goods sold of $490,000. The firm had a
beginning inventory of $69,000 and an ending inventory of $54,000. What is the length of the
days' sales in inventory?
58. PNB Cos. has sales of $250,000 and cost of goods sold of $120,000. The firm had a
beginning inventory of $19,000 and an ending inventory of $13,000. What is the length of the
days' sales in inventory?
59. Suppose that Tucker Industries has annual sales of $5 million, cost of goods sold of $2.78
million, average inventories of $1,125,000, and average accounts receivable of $500,000.
Assuming that all of Tucker's sales are on credit, what will be the firm's operating cycle?
60. Suppose that Mack Industries has annual sales of $10 million, cost of goods sold of $6.5
million, average inventories of $1 million, and average accounts receivable of $600,000. Assuming
that all of Mack's sales are on credit, what will be the firm's operating cycle?
61. Suppose that Sam Industries has annual sales of $2 million, cost of goods sold of
$950,000, average inventories of $45,000, and average accounts receivable of $90,000. Assuming
that all of Sam's sales are on credit, what will be the firm's operating cycle?
62. Suppose that Freddy's Fries has annual sales of $500,000, cost of goods sold of $375,000,
average inventories of $9,000, and average accounts receivable of $25,000. Assuming that all of
Freddy's sales are on credit, what will be the firm's operating cycle?
63. Suppose that Farrah's Hair Care has annual sales of $100,000, cost of goods sold of
$65,000, average inventories of $2,000, and average accounts receivable of $5,000. Assuming
that all of Farrah's sales are on credit, what will be the firm's operating cycle?
64. Suppose that Freddie's Fries has annual sales of $500,000; cost of goods sold of
$375,000; average inventories of $9,000; average accounts receivable of $25,000; and an average
accounts payable balance of $20,000. Assuming that all of Freddie's sales are on credit, what will
be the firm's cash cycle?
65. Suppose that Jamie's Jams has annual sales of $900,000; cost of goods sold of $600,000;
average inventories of $11,000; average accounts receivable of $50,000; and an average accounts
payable balance of $30,000. Assuming that all of Jamie's sales are on credit, what will be the
firm's cash cycle?
66. Suppose that Darlene's Donuts has annual sales of $200,000; cost of goods sold of
$90,000; average inventories of $4,000; average accounts receivable of $10,000; and an average
accounts payable balance of $7,000. Assuming that all of Darlene's sales are on credit, what will
be the firm's cash cycle?
67. Suppose your firm is seeking a 7-year, amortizing $100,000 loan with annual payments
and your bank is offering you the choice between a $110,000 loan with a $10,000 compensating
balance and a $100,000 loan without a compensating balance. If the interest rate on the $100,000
loan is 7 percent, how low would the interest rate on the loan with the compensating balance
have to be in order for you to choose it?
68. Suppose your firm is seeking a five-year, amortizing $900,000 loan with annual payments
and your bank is offering you the choice between a $950,000 loan with a $50,000 compensating
balance and a $900,000 loan without a compensating balance. If the interest rate on the $900,000
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?
69. Suppose your firm is seeking a 3-year, amortizing $300,000 loan with annual payments
and your bank is offering you the choice between a $305,000 loan with a $5,000 compensating
balance and a $300,000 loan without a compensating balance. If the interest rate on the $300,000
loan is 8 percent, how low would the interest rate on the loan with the compensating balance
have to be in order for you to choose it?
70. Rose Resources faces a smooth annual demand for cash of $10 million; incurs
transaction costs of $325 every time they sell marketable securities; and can earn 3.9 percent on
their marketable securities. What will be their optimal cash replenishment level?
71. Rose N More Resources faces a smooth annual demand for cash of $50 million; incurs
transaction costs of $350 every time they sell marketable securities, and can earn 5.2 percent on
their marketable securities. What will be their optimal cash replenishment level?
72. Reese's Resources faces a smooth annual demand for cash of $15 million; incurs
transaction costs of $125 every time they sell marketable securities, and can earn 4.5 percent on
their marketable securities. What will be their optimal cash replenishment level?
73. Hollywood Shoes would like to maintain their cash account at a minimum level of
$50,000, but expects the standard deviation in net daily cash flows to be $4,000; the effective
annual rate on marketable securities to be 6 percent per year; and the trading cost per sale or
purchase of marketable securities to be $100 per transaction. What will be their optimal cash
return point?
74. Happy Feet would like to maintain their cash account at a minimum level of $75,000, but
expects the standard deviation in net daily cash flows to be $5,000; the effective annual rate on
marketable securities to be 7 percent per year; and the trading cost per sale or purchase of
marketable securities to be $150 per transaction. What will be their optimal cash return point?
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