QUESTION 3 Given the three choices in the previous year, what is the return on e

Question

QUESTION 3

Given the three choices in the previous year, what is the return on equity for the firm during the second year? What is the implication of using short term instead of long-term debt during the two years? What is the EOQ for a firm that sells 5,000 units when the cost of placing an order is $5 and the carrying costs are $3.50 per units? How long will the EOQ last? How many orders are placed annually? As a result of lower interest rates, the financial manager determines the carrying costs are now $1.80 per unit. What are the new EOQ and annual number of objects? Given the following information: What is the EOQ? What is the average inventory based on the EOQ and the existing safety stock? What is the maximum level of inventory? How may orders are place each year? Taylor Glass has annual sales of $1,750,000. Although it extends credit for 30 days (n 30), the receivables are 20 days overdue. What is the average accounts receivable outstanding, and bow much could the company save in interest expense if customers paid on time and if it cost Taylor Glass 10 percent to carry its receivables? To increase sales, management is considering reducing its credit standards. This action is expected to increase sales by $125,000. Unfortunately, it is anticipated that 7 percent of the sales will be uncollectible. Accounts receivable turnover is expected to be 6 time a year, and it costs the firm 100 percent to carry its receivables. Collection costs will be 4 percent of sales, and the cost of the additional goods sold is $64,000. Will carnings increase? If a firm's sales are $1,500,000 and it costs 9 percent to carry current assets, what is the potential savings if management can increase inventory turnover from 3 to 4 times a year and increase receivables turnover from 4.5 to 6 time a year? As of January 1, Paul's car Repair has the following accounts receivable.

Explanation / Answer

Demand D = 5000 unit Ordering cost A = $5 Inventory carrying cost h = $3.50 ---------------------------------------------------------------------------------------------------- (a) EOQ = SQRT(2AD/h) = SQRT(2*5*5000/3.50) = 119.53 = 120 units ---------------------------------------------------------------------------------------------------- (b) Annual consumption is 5000 units So, 120 units will last 120*365/5000 days = 8.76 days No. of orders placed in 1 year = 5000/120 = 41.67 i.e. 42 orders per year ----------------------------------------------------------------------------------------------------- c) As a result of lower interest rate, icc becomes 1.80 So, new h = $1.80 EOQ = SQRT(2AD/h) = SQRT(2*5*5000/1.80) = 166.67 i.e. new EOQ = 167 No. of orders per year = 5000/167 = 29.94 i.e 30 orders per year

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.