eBook Pasha Corporation produces motorcycle batteries. Pasha turns out 2,500 batteries a day at a cost of $7 per battery for materials and labor. It takes the firm 25 days to convert raw materials into a battery. Pasha allows its customers 40 days in which to pay for the batteries, and the firm generally pays its suppliers in 30 days. Assume 365 days in year for your calculations. a. What is the length Pasha's cash conversion cycle? Round your answer to two decimal places. days b. At a steady state in which Pasha produces 2,500 batteries a day, what amount f working capital must finance? Round your answer to the nearest dollar. c. By what amount could Pasha reduce its working capital financing needs if it was able to stretch its payables deferral period to 39 days? Round your answer to the nearest dollar. d. Pasha's management is trying to analyze the effect of a proposed new production process on its working capital investment. The new production process would allow Pasha to decrease its inventory conversion period to 15 days and to increase its daily production to 2,750 batteries. However, the new process would cause the cost of materials and labor to increase to $11. Assuming the change does not affect the average collection period (40 days) or the payables deferral period (30 days), what will be the length of its cash conversion cycle and its working capital financing requirement if the new production process is implemented? Round your answer for cash conversion cycle to two decimal places and for working capital financing to the nearest cent. Cash conversion cycle days Working capital financing %24
eBook Pasha Corporation produces motorcycle batteries. Pasha turns out 2,500 batteries a day at a cost of $7 per battery for materials and labor. It takes the firm 25 days to convert raw materials into a battery. Pasha allows its customers 40 days in which to pay for the batteries, and the firm generally pays its suppliers in 30 days. Assume 365 days in year for your calculations. a. What is the length Pasha's cash conversion cycle? Round your answer to two decimal places. days b. At a steady state in which Pasha produces 2,500 batteries a day, what amount f working capital must finance? Round your answer to the nearest dollar. c. By what amount could Pasha reduce its working capital financing needs if it was able to stretch its payables deferral period to 39 days? Round your answer to the nearest dollar. d. Pasha's management is trying to analyze the effect of a proposed new production process on its working capital investment. The new production process would allow Pasha to decrease its inventory conversion period to 15 days and to increase its daily production to 2,750 batteries. However, the new process would cause the cost of materials and labor to increase to $11. Assuming the change does not affect the average collection period (40 days) or the payables deferral period (30 days), what will be the length of its cash conversion cycle and its working capital financing requirement if the new production process is implemented? Round your answer for cash conversion cycle to two decimal places and for working capital financing to the nearest cent. Cash conversion cycle days Working capital financing %24
Chapter19: Pricing Concepts
Section: Chapter Questions
Problem 6DRQ
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Transcribed Image Text:4. Problem 15.06 (Working Capital Investment)
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Pasha Corporation produces motorcycle batteries. Pasha turns out 2,500 batteries a day at a cost of $7 per battery for materials and labor. It takes the firm 25 days to convert raw materials into a battery. Pasha allows its customers 40 days in which to pay for
the batteries, and the firm generally pays its suppliers in 30 days. Assume 365 days in year for your calculations.
a. What is the length of Pasha's cash conversion cycle? Round your answer to two decimal places.
days
b. At a steady state in which Pasha produces 2,500 batteries a day, what amount of working capital must it finance? Round your answer to the nearest dollar.
c. By what amount could Pasha reduce its working capital financing needs if it was able to stretch its payables deferral period to 39 days? Round your answer to the nearest dollar.
d. Pasha's management is trying to analyze the effect of a proposed new production process on its working capital investment. The new production process would allow Pasha to decrease its inventory conversion period to 15 days and to increase its daily
production to 2,750 batteries. However, the new process would cause the cost of materials and labor to increase to $11. Assuming the change does not affect the average collection period (40 days) or the payables deferral period (30 days), what will
be the length of its cash conversion cycle and its working capital financing requirement if the new production process is implemented? Round your answer for cash conversion cycle to two decimal places and for working capital financing to the nearest
cent.
Cash conversion cycle
days
Working capital financing
$
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