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Finance questions

1. If a company's inventory turnover ratio is 24, how long is the firm's inventory conversion period if you use a 360-day year?

2. To finish college, you need $18,000 per year for 4 years, starting next year (that is, you will need to withdraw $18,000 one year from today). A relative offers to pay the expense by depositing in a bank time deposit paying 5 percent interest a sum of money that is sufficient to provide the four payments of $18,000 each. How much money do you have in the account after the first withdrawal?

3. A credit union offers a savings account with the interest rate of 10% compounded daily. What is the effective interest rate if you use 360-day year?

4. As a lottery winner you are going to receive $10,000 every year forever, starting one year from today. If the appropriate discount rate is 10%, what is the present value of the award cash flows?

Solution Preview

1. Inventory conversion period = 360/Inventory turnover = 360/24 = 15 days

2. After the first withdrawal the amount of money would be the present value of the remaining withdrawals ...

Solution Summary

The solution explains some finance questions relating to inventory conversion period, amount in the account, effective interest rate and present value of award