Complete Problem Set 3 in MindTap

FIN 650/PROBLEM SET 3

Inventory Management

Williams & Sons last year reported sales of $37 million, cost of goods sold (COGS) of $30 million, and an inventory turnover ratio of 5. The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 6 while maintaining the same level of sales and COGS, how much cash will be freed up? Do not round intermediate calculations. Enter your answer in dollars. For example, an answer of $1.23 million should be entered as 1,230,000,000. Round your answer to the nearest dollar.

$  

Receivables Investment

Medwig Corporation has a DSO of 44 days. The company averages $6,000 in sales each day (all customers take credit). What is the company's average accounts receivable? Assume a 365-day year. Round your answer to the nearest dollar.

$  

Cost of Trade Credit

A large retailer obtains merchandise under the credit terms of 1/15, net 45, but routinely takes 55 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume a 365-day year. Do not round intermediate calculations. Round your answer to two decimal places.

  %

Accounts Payable

A chain of appliance stores, APP Corporation, purchases inventory with a net price of $350,000 each day. The company purchases the inventory under the credit terms of 2/15, net 30. APP always takes the discount but takes the full 15 days to pay its bills. What is the average accounts payable for APP? Round your answer to the nearest dollar.

Cross Rates

At today's spot exchange rates 1 U.S. dollar can be exchanged for 12 Mexican pesos or for 110.43 Japanese yen. You have pesos that you would like to exchange for yen. What is the cross rate between the yen and the peso; that is, how many yen would you receive for every peso exchanged? Do not round intermediate calculations. Round your answer to two decimal places.

 yen per peso

Interest Rate Parity

The nominal yield on 6-month T-bills is 8%, while default-free Japanese bonds that mature in 6 months have a nominal rate of 5%. In the spot exchange market, 1 yen equals $0.011. If interest rate parity holds, what is the 6-month forward exchange rate? Do not round intermediate calculations. Round your answer to five decimal places.

$  

Exchange Rate

If euros sell for $1.28 (U.S.) per euro, what should dollars sell for in euros per dollar? Round your answer to four decimal places.

 euros per dollar