energy sector problem set for wk 3
tiger_
wk_3_problem_set.xlsCash Conversion Cycle
| FIN 565/EM | 15 Possible Points | ||||
| Problem Set 2 | |||||
| Show All Work | |||||
| 1. Compute XYZ Corps cash conversion cycle given that the inentory turn ratio is 6.0, receievable turn ratio is 10 and payable turn ratio is 12. (4 points) | |||||
| Reference Chapter 22, Equations 22.1 through 22.4 |
Cost of Credit
| FIN 565/EM |
| Problem Set 2 |
| Show All Work |
| 2. XYZ Corp is offered terms of 2/10 net 45 by ABC Corp. It is XYZ Corps policy to pay discounts so long as the APY of the credit is greater than 20%. (4 points) |
| What is the cost of the trade credit offered by ABC Corp? Should XYZ take the discount, given their policy? |
| Reference Chapter 22, Equations 22.6 and 22.7 |
Cost of Bank Loan
| FIN 565/EM |
| Problem Set 2 |
| Show All Work |
| 3. XYZ Corp is considering borrowing $50,000.00 from ABC Bank. The loan must be paid back with monthly payments of $4,667.67 over the next year. Nominal interest rate is 12%. A total of $6000.00 will be paid by XYZ in interest. |
| What is the Annual Percentage Yield of this loan? (4 points) |
| Reference Chapter 22, Equations 22.8 and 22.9 |
Credit Granting Decision
| FIN 565/EM | |||||
| Problem Set 2 | |||||
| Show All Work | |||||
| 4. Using the data below, determine the NPV of the sale and using this NPV, make the credit decision in each case. (3 points total) | |||||
| Reference Chapter 23, Equation 23.1 | |||||
| Item | Sale Price | Cost of Goods Sold | Collection | Required Return | Probability of Repayment |
| Snowmobile | $ 1,200.00 | $ 1,000.00 | 3 mo | 12% | 80% |
| Bracelet | $ 300.00 | $ 150.00 | 12 mo | 14% | 95% |
| Computer | $ 800.00 | $ 550.00 | 6 mo | 13% | 90% |
