Finance Assignment

1538 Words Nov 13th, 2011 7 Pages

Question 1 (16 points) Carol Inc is considering the following three prices to charge customers for each of the candy packets they produce: i) $2.20 ii) $2.00 iii) $1.70 The relevant data for decision-making is below: Fixed Costs = $1200 Variable Costs = $0.50 per unit Calculate the following: a) The Breakeven Point for each price level b) Using price of $2.20 what would be the new breakeven point if (1) fixed costs decreased to $1000 all else remaining the same, (2) Variable costs increased to $0.75 all else remaining the same. Draw a graph to represent scenario (1) and (2) comparing with the original data for price of $2.20. [Total of two graphs] Question 2 (12 points) Greater Manufacturing is evaluating two different operating
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Calculate the dollar discount that the company will have to give Penelope Production Plant to result in a net benefit to the company.


Question 8 (6 points) Hubbards is analyzing the performance of its cash management. On average, the firm holds inventory 65 days, pays its suppliers in 35 days, and collects its receivables in 15 days. The firm has a current annual outlay of $1,960,000 on operating cycle investments. Hubbards currently pays 10 percent for its negotiated financing. (Assume a 360 day year.) (a) Calculate the firm's cash conversion cycle. (b) Calculate the firm's operating cycle. (c) Calculate the daily expenditure and the firm's annual savings if the operating cycle is reduced by 15 days. Question 9 (14 points) Table 15.2

The company earns 5 percent on current assets and 15 percent on fixed assets. The firm's current liabilities cost 7 percent to maintain and the average annual cost of long-term funds is 20 percent. a) The firm's initial net working capital is ________. [Numerical Answer] b) The firm's initial annual profits on total assets are ________. [Numerical Answer] c) If the firm was to shift $3,000 of current assets to fixed assets, the firm's net working capital would ________, the annual profits on total assets would ________, and the risk of technical insolvency would ________, respectively. [Choose either the word increase or decrease for each blank] d) If the firm was to shift $7,000 of fixed assets to current assets, the

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