Essay on Managerial Finance Final Exam

1361 Words May 29th, 2013 6 Pages
Which of the following is NOT normally regarded as being a barrier to hostile takeovers? (Points : 5) | Abnormally high executive compensation Targeted share repurchases Shareholder rights provisions Restricted voting rights Poison pills |

2. (TCO F) Which of the following statements is correct? (Points : 5) | The MIRR and NPV decision criteria can never conflict. The IRR method can never be subject to the multiple IRR problem, while the MIRR method can be. One reason some people prefer the MIRR to the regular IRR is that the MIRR is based on a generally more reasonable reinvestment rate assumption. The higher the WACC, the shorter the discounted payback period.
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34.0
b. 37.4
c. 41.2
d. 45.3
e. 49.8 (Points : 30)
A; 34.0 DAYS

CASH CONVERSION CYCLE = (DAYS INVENTORY OUTSTANDING) + (DAYS SALES OUTSTANDING) - (DAYS PAYABLE OUTSTANDING)

CCC impact by inventory reduction
(DAYS INVENTORY OUTSTANDING) = (Average inventory / Cost of goods sold) * 365
Original (DAYS INVENTORY OUTSTANDING) = ($20,000/$80,000) *365 =91.25 days
Revised (DAYS INVENTORY OUTSTANDING)= ($16,000/$80,000 *365) = 73 days
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CCC by reduced accounts receivable
(DAYS PAYABLE OUTSTANDING) = (Accounts payable / Cost of goods sold) * 365
Original (DAYS PAYABLE OUTSTANDING) = ($10,000/$80,000)*365 = 45.625 days
Revised (DAYS PAYABLE OUTSTANDING) = ($12,000/$80,000) *365 = 54.75 days
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CCC impact by increased a/c payable
(DAYS SALES OUTSTANDING) = (Total receivables / Total credit sales) * 365
Original (DAYS SALES OUTSTANDING) = ($16,000/$110,000 *365) = 53.09 days
Revised (DAYS SALES OUTSTANDING) = ($14,000/$110,000 *365) = 46.45 days
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CCC = (DAYS INVENTORY OUTSTANDING) + (DAYS SALES OUTSTANDING) – (DAYS PAYABLE OUTSTANDING)
Original CCC = 91.25 + 53.09 – 45.63 = 98.71 days
Revised CCC = 73 + 46.45 – 54.75 = 64.7 days
Total impact = original CCC – Revised CCC = 98.71 – 64.7 = 34.01 days
CCC will be lowered by 34.0 days
2. (TCO C) Your company has been offered credit terms of 4/30, net 90 days. What will be the nominal annual percentage cost of its nonfree trade credit if it pays 120
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