A1. NPV of Granting Credit

A1. (NPV of Granting Credit)

Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)

Individual assignment: Text Problem Set
Chapter Problems

A1. (NPV of granting credit) A credit sale of $15,000 has a 95% probability of being repaid in two months and a 5% probability of a complete default. If the investment in the sale is $12,000 and the opportunity cost of funds is 15% per year, what is the NPV of granting credit?

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A12. Cost of Bank Loan

A12. (Cost of Bank Loan)

Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)

Individual assignment: Text Problem Set
Chapter Problems

A12. (Cost of bank loan) A bank loan agreement calls for an interest rate equal to prime rate plus 1%. If prime rate averages 9% and non-interest-earning compensating balances equal to 10% of the loan must be maintained, what are the APR and the APY of the loan assuming annual payments?

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A3. Cash Conversion Cycle

A3. (Cash Conversion Cycle)

Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)

Individual assignment: Text Problem Set
Chapter Problems

A3. (Cash conversion cycle) Dennis Lasser has collected some information about a food wholesaler in order to estimate its cash conversion cycle. The accumulated information is given. What will Dennis find the cash conversion cycle to be?

Inventory turnover = 10x Inventory conversion period = 365/10 = 36.5 days
Receivables turnover = 20x Receivables collection period = 365/20 = 18.25 days
Payables turnover = 25x Payables deferral period = 365/25 = 14.6 day

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