Excel: Short-Term Finance

 1. Apache's first quarter's 2019 financials are being prepared and the CFO wants you to use them to calculate days receivable, days inventory, operating cycle, days payable, and cash cycle for each of the three months of 1Q19. The financials are below: 

2.Apache sells maintenance services to various private jet operators. For these, Apache's demands payment within 30 days. Apache is considering changing this policy to 1/5, net 30. What is the implicit effective annual rate in this payment policy? 

3. Apache's maintenance service business grosses some $20M per year before discounts and its average days receivable is 30 (unlike the overall business where this number is ~40). If 25% of Apache's clients opt to pay earlier and get the discount, what will be the change in the service business's receivables? If Apache's cost of capital is 8%, what are the projected savings of this change in policy? If Apache's gross margin is 40%, by how much will gross dollar revenues have to rise to offset the loss from discounts? In percent?

 4. A new client from out of town is quoted $6,000 for a repair. The service people ask you to approve this. You do a quick check on the client and assess a 15% default risk. What is the NPV of the client? What is the break-even probability? What is the minimum probability of collecting for you to approve the service?