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EOQ Derivation Prove that when carrying costs and restocking costs are as described in the chapter, the EOQ must occur at the point where the carrying costs and restocking costs are equal.

Credit Policy Evaluation The Killarney Corporation is considering a change in its cash-only policy. The new terms would be net one period. Based on the following information, determine if Killarney should proceed or not. The required return is 3 percent per period.

Credit Policy Evaluation Gorillaz Systems currently has an all-cash credit policy. It is considering making a change in the credit policy by going to terms of net 30 days. Based on the following information, what do you recommend? The required return is 2 percent per month.

Break-Even Quantity In Problem 14, what is the break-even quantity for the new credit policy?

Credit Markup In Problem 14, what is the break-even price per unit that should be charged under the new credit policy? Assume that the sales figure under the new policy is 3,300 units and all other values remain the same. Credit Markup In Problem 15, what is the break-even price per unit under the new credit policy? Assume all other values remain the same. Safety Stocks and Order Points Saché, Inc., expects to sell 700 of its designer suits every week. The store is open seven days a week and expects to sell the same number of suits every day. The company has an EOQ of 500 suits and a safety stock of 100 suits. Once an order is placed, it takes three days for Saché to get the suits in. How many orders does the company place per year? Assume that it is Monday morning before the store opens, and a shipment of suits has just arrived. When will Saché place its next order?

Banker's Acceptance Rates What are the highest and lowest historical interest rates for banker's acceptances? Go to www.economagic.com and follow the "Interest Rates" link. Find the highest and lowest interest rates for one-, two- and three-month banker's acceptances over the time reported. When did they occur?

Spreadsheet Templates 21-4, 21-7, 21-9, 21-1O, 21-11, 21-16, 21-18

Ross et al.: Fundamentals of Corporate Finance, Sixth Edition, Alternate Edition

VII. Short-Term Financial Planning and Management

21. Credit and Inventory Management

© The McGraw-Hill Companies, 2002

CHAPTER 21 Credit and Inventory Management

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