1 - JustAnswer

							Please ALWAYS reword essay type questions


1. Text Problems, Exercises, and Case:
   Prepare answers to the following problems from the text, Fundamentals of Corporate
   Finance, by Brealey:
   a. Chapter 19: Quiz Problem 1
Hi Business Tutor I do not think this assignment is worth $30 but if that is what I have to
   pay that will be fine I was wondering if I could just add it to the other assiugnment and
   up the price a little more. This is also needed for midnight Monday.


1. Working Capital Management. Indicate how each of the following six different
    transactions
that Dynamic Mattress might make would affect (i) cash and (ii) net working capital:
a. Paying out a $2 million cash dividend.
b. A customer paying a $2,500 bill resulting from a previous sale.
c. Paying $5,000 previously owed to one of its suppliers.
d. Borrowing $1 million long-term and investing the proceeds in inventory.
e. Borrowing $1 million short-term and investing the proceeds in inventory.
f. Selling $5 million of marketable securities for cash.
    a. Chapter 19: Quiz Problem 5
Managing Working Capital. A new computer system allows your firm to more accurately
  monitor inventory and anticipate future inventory shortfalls. As a result, the firm feels
  more able to pare down its inventory levels. What effect will the new system have on
  working capital and on the cash conversion cycle?
  Prepare answers to the following problems, exercise, and case from the text, Accounting:
  Concepts & Applications, by Albrecht:
  a. Chapter 22: Discussion Question 3
Why is the time value of money so important in capital budgeting decisions?


1)
Cash                                        Net Working Capital

1 Decrease                                          Decrease
2 Increase                                        No change

3.Decrease                                        No Change

4. No Change(money raised will be spent)           Increase

5 No Change                                No Change (inventory increases....so does
liability)

6 Increase                             No change(marketable securities replaced by cash)

2)

The firm can use its new system to maintain lower inventory levels. This will reduce the

inventory period and therefore the cash conversion cycle, and will reduce net working

capital as well.



3)

The concept that money has value over time is important in accounting and especially

in capital budgeting. Like other commodities, money has value because it is a scarce


resource. Therefore, an interest payment is generally required for its use. Businesses

should seek to use money in the most profitable way possible. Otherwise, companies are

likely to incur high opportunity costs and will not keep pace with inflation. Businesses

should therefore consider the time value of money when making capital budgeting

decisions.