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• Ch. 18: Questions 3 & 11 (Questions and Problems section)

#3. Changes in the Operating Cycle [LO1] Indicate the effect that the following will have on the operating cycle. Use the letter I to indicate an increase, the letter D for a decrease, and the letter N for no change:

a. Average receivables goes up.

b. Credit repayment times for customers are increased.

c. Inventory turnover goes from 3 times to 6 times.

d. Payables turnover goes from 6 times to 11 times.

e. Receivables turnover goes from 7 times to 9 times.

f. Payments to suppliers are accelerated.

#11.

• Ch. 20: Questions 8 & 14 (Questions and Problems section)

#8. Size of Accounts Receivable [LO1] The Arizona Bay Corporation sells on credit terms of net 30. Its accounts are, on average, four days past due. If annual credit sales are $9.75 million, what is the company’s balance sheet amount in accounts receivable?

#14.

• Ch. 21: Questions 4 & 7 (Questions and Problems section)

 4.   Using Spot and Forward Exchange Rates [LO1] Suppose the spot exchange rate for the Canadian dollar is Can$1.09 and the six-month forward rate is Can$1.11.

a.   Which is worth more, a U.S. dollar or a Canadian dollar?

b.   Assuming absolute PPP holds, what is the cost in the United States of an Elkhead beer if the price in Canada is Can$2.50? Why might the beer actually sell at a different price in the United States?

c.   Is the U.S. dollar selling at a premium or a discount relative to the Canadian dollar?

d.   Which currency is expected to appreciate in value?

e.   Which country do you think has higher interest rates—the United States or Canada? Explain.

#7. Interest Rates and Arbitrage [LO2] The treasurer of a major U.S. firm has $30 million to invest for three months. The interest rate in the United States is .31 percent per month. The interest rate in Great Britain is .34 percent per month. The spot exchange rate is £.573, and the three-month forward rate is £.575. Ignoring transaction costs, in which country would the treasurer want to invest the company’s funds? Why?

• Ch. 26: Questions 1 & 2 (Questions and Problems section): Microsoft® Excel®template provided for Problem 2