Quantity Discount Economic Order Quantity by fmz82055

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									                           6776c227-9f62-4910-b095-07c0d6cce064.xls




                         CHAPTER 16 PROBLEMS
                      LIQUID ASSET MANAGEMENT
PROBLEM 16-1
BUYING AND SELLING MARKETABLE SECURITIES

DATA
Excess cash                       1,500,000
Transactions fees                    30,000

A)
Yield                                 8.25%
                                               Recommendation
1)   One month
2)   Two months
3)   Three months
4)   Six months
5)   One year

B)
Breakeven yield =

PROBLEM 16-2
COST OF SERVICES

DATA
Receives                         24,000,000
No. of checks                        10,000
Unit cost                              0.25
Yield                                    8%
Days in yr                              365

A)
Avg check size =                       2,400
Opportunity cost =                 0.000219
Reduction in days =

B)
Yield                                 4.00%
Reduction in days =

PROBLEM 16-3


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CONCENTRATION BANKING

DATA
Credit sales                 438,000,000
Flat fee                         200,000
Mail float                             3
Processing float                       1
Rate                                  8%
Save in proc costs                66,000
Days in yr                           365

Daily revenue =
For float reduction =
Saving in int costs =

Cost of centralized =
Less: flat fee
Net annual gain =

PROBLEM 16-4
CONCENTRATION BANKING

DATA
Credit sales                 362,000,000
Flat fee                         175,000
Mail float                             3
Processing float                       1
Rate                                  7%
Save in proc costs                57,500
Days in yr                           365

Daily revenue =
For float reduction =
Saving in int costs =

Cost of centralized =
Less: flat fee
Net annual gain =

PROBLEM 16-5
BUYING AND SELLING MARKETABLE SECURITIES



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DATA
Excess cash                    800,000              Yes
Transactions fees               20,000              No

A)
Yield                           10.50%
                                          Recommendation
1)   One month
2)   Two months
3)   Three months
4)   Six months
5)   One year

B)
Breakeven yield =

PROBLEM 16-6
COSTS OF SERVICES

DATA
Receives                    12,000,000
No. of checks                    6,000
Unit cost                         0.20
Yield                               7%
Days in yr                         365

A)
Avg check size =
Opportunity cost =
Reduction in days =

B)
Yield
Reduction in days =

PROBLEM 16-7
LOCK-BOX SYSTEM

DATA
Sales regions                        10
Mail float                          3.2
Process float                         1


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Annual sales                    4,800,000
Yield                                   7%
Reduce mail float by                   1.2
Reduce proc foat by                      2
Cost each region                      250
Days in yr                            365

A)
Annual collection =
Daily collection =
Opportunity cost =

B)
Gross annual savings =
Cost of operation =
Net annual savings =

PROBLEM 16-8
CASH RECEIPTS ACCELERATION SYSTEM

DATA
Mail float                              5
Process float                           2
Remittances                     1,000,000
Avg check size                      2,000
Yield                                  6%
Lock boxes                              4
Reduce mail float                       3
Reduce proc floaT                       2
Transferred                             2
Unit check cost                        15
Days in yr                            270
Unit proc cost                       0.18

A)
Red in mail float =
Red in proc float =
Total float red =

B)
Opportunity cost =



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C)
Avg no. of checks =
Cost of system =
Cost of ADTC =
Total cost =

D)
Projected return =
Less: cost
Net annual gain =

PROBLEM 16-9
MARKETABLE SECURITIES PORTFOLIO

DATA
Wage bill                              500,000
Cost                                    35,000
Yield                                       7%
Paid every                                   4
Acc wages pay                          250,000

A)
Avg accrued wages =
More to invest =
Annual return =
Net annual savings =

B)
Annual ROR =

PROBLEM 16-10
VALUING FLOAT REDUCTION

DATA
Credit sales                        12,000,000
Days in yr                                 270
Processing                                   4
Reduce proc by                               2
Yield                                       6%

Annual savings for two days



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PROBLEM 16-11
ACCOUNTS PAYABLE POLICY AND CASH MANAGEMENT

DATA
Purchases                          37,500,000
Sales                              65,000,000
Drop from last yr                         20%
Discounts % of pymts                      25%
 rate                                      3%
Opportunity cost                          12%
Increase price by                        0.5%
Days in yr                                365

Purchases discounted =
Puchase disc earned =
Actually pays =
Annual amt not disc =

                       45 Day proposal:
      1)              2)              3)                  $)
   Principal      Extra-time       Interest            Interest
   Amount         Available          Rate              Earned




Total return =

Lost Discount earned =
Total return =


                       60 Day proposal:
      1)              2)              3)                  $)
   Principal      Extra-time       Interest            Interest
   Amount         Available          Rate              Earned




Total return =

Lost Discount earned =
Total return =


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Price Increase:
Purchases

Price increase
Net added return
Loss

PROBLEM 16-12
INTEREST RATE RISK

DATA
Years ago                                    2
Bond                                        20
Par value                                1,000
Coupon rate                                 8%
Yield                                       9%

A)
Sold for =




B)
Amt of loss =

C)
Bond               maturity                   4 years
Sold for =




Amt of loss =

PROBLEM 16-13
COMPARISON OF AFTER-TAX YIELD

DATA
Bond:
 Coupon rate                                9%
 Tax rate                                  46%


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 Face value                        1,000
Municipal:
 Coupon rate                       5.50%
 Par value                         1,000

A)
A-T bond yield =
A-T municipal yield =

B)
Necessary yield =

PROBLEM 16-14
TRADE CREDIT DISCOUNTS

A)
1/10, net 20:
  Percent                            0.01
  Days                                360
  Net                                  10
Effective cost =

B)
2/10, net 30:
  Percent                            0.02
  Days                                360
  Net                                  20
Effective cost =

C)
3/10, net 30:
  Percent                            0.03
  Days                                360
  Net                                  20
Effective cost =

D)
3/10, net 60:




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 Percent                                 0.03
 Days                                     360
 Net                                       50
Effective cost =

E)
3/10, net 90:
  Percent                                0.03
  Days                                    360
  Net                                      80
Effective cost =

F)
5/10, net 60:
  Percent                                0.05
  Days                                    360
  Net                                      50
Effective cost =


PROBLEM 16-15
ALTMAN MODEL

DATA
                                                Mrkt Value
                                                of C/E/Book
                                                  Value of             Earn/          Working
                   EBIT/TA        Sales/TA          Debt                TA            Cptl/TA
Applicant 1              0.20            0.20            1.20                  0.30         0.50
Applicant 2              0.20            0.80            1.00                  0.30         0.80
Applicant 3              0.20            0.70            0.60                  0.30         0.40
Applicant 4              0.10            0.40            1.20                  0.40         0.40
Applicant 5              0.30            0.70            0.50                  0.40         0.70
Applicant 6              0.20            0.50            0.50                  0.40         0.40




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Applicant 1 =
Applicant 2 =
Applicant 3 =
Applicant 4 =
Applicant 5 =
Applicant 6 =




PROBLEM 16-16
RATIO ANALYSIS

A)
Sales                          600,000
Gross profit margin                10%
Inv turnover ratio                   6

COGS =                         540,000
Average Inventory =

B)
COGS                           480,000
Average age of inv                  40

Inventory turnover                    9
Average inventory =

C)
COGS                         1,150,000
Inventory turnover                   5

Average inventory =

D)
Sales                       25,000,000




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                            6776c227-9f62-4910-b095-07c0d6cce064.xls


Gross profit margin                      14%
Average age of inv                        45

COGS                              21,500,000
Inventory turnover                         8
Average inventory =

PROBLEM 16-17
EOQ CALCULATIONS

DATA
Copies sold                            3,000
Price                                   1.50
Wholesale price                         1.00
Cost for carrying                       0.10
Ordering cost                          10.00
A)
Order quantity =                     600,000
Economic order quantity =
B)
Order once =
Order four times =
Order five times =
Order ten times =
Order fifteen times =

PROBLEM 16-18
COMPREHENSIVE EOQ CALCULATIONS

DATA
Order                                    100




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                              6776c227-9f62-4910-b095-07c0d6cce064.xls


Annual usage                           250,000
Carrying cost: price                       10%
Purchase price                           10.00
Ordering cost per order                 100.00
Safety stock                             5,000
Weeks to deliver                             1
A)
Order quantity =                    50,000,000
Economic order quantity =
B)
Orders per year =
C)
Inventory order point =
D)
Average Inventory =
E)
Economic order quantity =
Elasticity of EOQ =
F)
Economic order quantity =
Elasticity of EOQ =
G)
Economic order quantity =
Elasticity of EOQ =

COMPREHENSIVE PROBLEM

DATA
Average daily collections =            150,000
Avg. remittance size =                     750
Interest rate =                              5%
Amount clerical saved=                  55,000
Check processing =                        0.30
Reduction in mail float =                   2.5
Reduction in processing float =               3
# of days =                                270
DTC cost =                                0.35
# of daily transfers =                        6

A)




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Total float reduction =
B)
Total opportunity cost =
C)
Expected annual cost =
D)
Net annual gain (loss) =




                                           Page 13

								
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