Share
Explore BrainMass

Cash Conversion Cycle, Breakeven, Required ROR, Payback & NPV

A firm has annual operating outlays of $1,800,000 and a cash conversion cycle of 60 days. If the firm currently pays 12 percent for negotiated financing and reduces its cash conversion cycle to 50 days, what is the annual savings?

A firm has interest expense of $145,000, preferred dividends of $25,000, and a tax rate of 40 percent. What is the firm's financial breakeven point?

Asset P has a beta of 0.9. The risk free rate of return is 8 percent, while the return on the market portfolio of assets is 14 percent. What is the asset's required rate of return?

A firm is evaluating a proposal which has an initial investment of $35,000 and has cash flows of $10,000 in year 1, $20,000 in year 2, and $10,000 in year 3. Calculate the payback period of the project.

What is the NPV for the following project if its cost of capital is 15 percent and its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash inflows of $1,800,000 in year 1, $1,900,000 in year 2, $1,700,000 in year 3 and $1,300,000 in year 4?

Solution Preview

Please see the attached file.

A firm has annual operating outlays of $1,800,000 and a cash conversion cycle of 60 days. If the firm currently pays 12 percent for negotiated financing and reduces its cash conversion cycle to 50 days, what is the annual savings?

The daily cash outlay is 1,800,000/360=$5,000. With a cash conversion cycle of 60 days, total financing needs are 5,000X60=300,000. With a cash conversion cycle of 50 days, the total financing needs are 5,000X50=$250,000. Reduction in financing needs = 300,000-250,000=$50,000.
Annual cash savings = 50,000X12%=$6,000

A firm has ...

Solution Summary

The solution has various finance questions relating to cash conversion cycle, breakeven, required ROR, payback period and NPV

$2.19