MLX has annual sales of $320 million per year and has calculated the collection float to be 12 days. If MLX is currently paying 9.35% on its line of credit, what amount of interest expense could be saved if the collection float is reduced by 3 days? (Assume 365 days per year.)

MLX has annual sales of $320 million per year and has calculated the collection float to be 12 days. If MLX is currently paying 9.35% on its line of credit, what amount of interest expense could be saved if the collection float is reduced by 3 days? (Assume 365 days per year.)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 11P: Negus Enterprises has an inventory conversion period of 50 days, an average collection period of 35...

See similar textbooks

Related questions

Q: Kelly expects its sales to be $20 million this year under its current credit policy. The present…

A: Given:

Q: Zycad has sales of $110 million a year. If Zycad reduces their processing float by 3 days, what is…

A: The computation of increase in firm’s average cash balance is as follows:

Q: The firm's average accounts receivable balance is P2.5 million, and they are financed by a bank loan…

A: In the given question, the annual savings in interest cost will be compared with the annual cost of…

Q: Income from sales of certain hardened steel connectors was P400,000 in the ﬁrst quarter, P410,000 in…

A: Present Value: The present value is the value of cash flow stream or the fixed lump sum amount at…

Q: company has annual credit sales of €10 million, and a cost of capital of 7%. At present the…

A: In this question, we have to find out the discount scheme of the company's profit and loss.

Q: Parramore Corp has $12 million of sales, $1 million of inventories, $4 million of receivables, and…

A: The cash conversion cycle is a measure of estimating the time period for a corporation in which the…

Q: MLX has annual sales of $320 million per year and has calculated the collection float to be 12 days.…

A: Collection float means that the amount deposited by customer but that is not available for use. So…

Q: Lamar Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 60; and it…

A: Additional credit can be calculated by using this equation Additional credit =Cost of…

Q: The Karson transport company currently has net operating income of $495,000 and pays interest…

A: Times interest earned ratio = operating income/interest expense

Q: A firm has annual operating outlays of P1,800,000 and a cash conversion cycle of 60 days. If the…

A: Cash Conversion Cycle: The cash conversion cycle (CCC) is a statistic that represents the amount of…

Q: Calculate the cash conversion cycle. Round your answer to the nearest whole number. days…

A: Information Provided: COGS = $144,000 (60% of sales) Inventory Turnover = 30x Accounts Receivable =…

Q: DDR Corporation has a 12 percent opportunity cost of funds and currently sells on terms of net/10,…

A: Total amount to be received from the customer after 60 days on term net/10 is as follows: Resultant…

Q: An investment of $200,000 is required to expand a certain production facility in a manufacturing…

A: Equivalent operating cost for the project is calculated as follows: First calculate the inflated…

Q: how much cash should Buccaneer raise from selling securities each week to minimize its costs of…

A: Economic Order cash is the cash quantity hat should maintain by the entity in order to minimize the…

Q: Sexy Inc. makes use of the lockbox system, what would be the net benefit to the company? Use 365…

A: Given, Fixed Fee = P 50,000 Interest Rate = 6%

Q: Valve Corporation spent P600,000 per year for the past 3 years in developing their latest product.…

A: Here, we need to equate the present value of the cost and revenues. PV of cost now = PV of base…

Q: Camp Manufacturing turns over its inventory eight times each year, has an average payment period of…

A: Given, Average collection period = 35 days Annual sales = $ 3.5 million Day's in…

Q: Twelve years ago, the Archer Corporation borrowed $6,850,000. Since then, cumulative inflation has…

A: Inflation reduces the purchasing power of the money. Dollar today will be less than one dollar after…

Q: Hurkin Manufacturing Company pays accounts payable on the tenth day after purchase. The average…

A: Working capital is the cash needed to run a firm on a day-to-day basis, such as purchasing raw…

Q: Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 55, and it…

A: Computation of effective cost of bank loan is as follows:Additional credit=8000000365×50…

Q: Dome Metals has credit sales of $450,000 yearly with credit terms of net 45 days, which is also the…

A: Decrease in accounts receivable = Average accounts receivable without discount- Average accounts…

Q: Enticement Co currently expects sales of $50,000 a month. Variable costs of sales are $40,000 a…

A: In the purview of the question, we are required to compute the increase in accounts receivable,…

Q: Assuming that the average duration of First National Bank's $100 million assets is five years, while…

A: The following calculations are done for First National Bank.

Q: Parramore Corp has $17 million of sales, $3 million of inventories, $2.25 million of receivables,…

A: Step 1: “Since you have posted a question with multiple sub-parts, we will solve first three…

Q: Parramore Corp has $18 million of sales, $2 million of inventories, $3.5 million of receivables, and…

A: Since you have asked a question with multiple parts, we will solve the first 3 parts as per policy.…

Q: The management of XYZ Co has annual credit sales of $20 million and accounts receivable of $4…

A: Answer: Collection Period = Accounts Receivable/Credit Sales × 365 days Put the values in the…

Q: Eaglet Company has a 12 percent opportunity cost of funds and currently sells on terms of net/10,…

A: Total amount to be received from the customer after 60 days on term net/10 is as follows: Resultant…

Q: A corporation has $344 million in sales,$232 million in COGS, $53 million in inventory, $128 million…

A: Cash conversion cycle = [Average inventoryCost of goods sold + Average receivablesNet sales-Average…

Q: James Inc. currently has P750,000 in accounts receivable, and its day sales outstanding (DSO) is 55…

A: Days sales outstanding = 365/ Accounts receivable turnover where, Accounts receivable turnover =…

Q: JA Inc. has average inventory of $1,000,000. Its estimated annual sales are $10 million and the firm…

A: Calculation of Inventory Conversion Period: =365 days * Inventory/Sales =365 * $1,000,000 /…

Q: Dome Metals has credit sales of $450,000 yearly with credit terms of net 45 days, which is also the…

A: Credit management is considered to be important part. Discount are offered in order to receive…

Q: Warren's Hats forecasts that it will sell 25,000 baseball caps next year. The company buys its caps…

A: Given the following information: Budgeted sales: 25,000 baseball caps Variable cost: $3 per cap…

Q: The Sandbox's Company has cash needs of P5 million per month. If Sandbox needs more cash, it can…

A: To determine the transactions costs (per month) associated the cash infusions we first need to…

Q: James Inc. currently has P750,000 in accounts receivable, and its day sales outstanding (DSO) is 55…

A: Accounts receivable: It refers to the number of payments that the company will receive from its…

Q: what will be the annual savings?

A: Annual savings are the savings per year after deducting all the costs and expenses from the incomes…

Q: The company has sales of $ 10 million per year, all of which are from credit terms that require…

A: The average number of days that is taken by the company to recover its sales payment or its accounts…

Q: Leyton Lumber Company has sales of $10 million per year, all on credit terms calling for payment…

A: Days sales outstanding refers to the number of days taken by the company in collecting the cash from…

Q: Dome Metals has credit sales of $162,000 yearly with credit terms of net 30 days, which is also the…

A: Firm often make strategies to collect account receivables outstanding balance at an early point of…

Q: Parramore Corp has $10 million of sales, $2 million of inventories, $4 million of receivables, and…

A: Ratio analysis: This is the quantitative analysis of financial statements of a business enterprise.…

Q: MLX has annual sales of $320 million per year and has calculated the collect float to be 12 days. If…

A: Collection float means that the amount deposited by customer but that is not available for use. So…

Q: Eaglet Corporation has a 12 percent opportunity cost of funds and currently sells on terms of…

A: Credit terms refer to the payment time period offered to the customers at the time of sale of a…

Q: Leyton Lumber Company has sales of $12 million per year, all oncredit terms calling for payment…

A: Capital refers to the desired amount of cash and other financial assets such as stocks, bonds,…

Concept explainers

Inventory Accounting

Inventory accounting is that branch of accounting that helps in determining the specific value of assets at different stages of production and development.

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

WORKING

VIEW

ANSWER

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Leyton Lumber Company has sales of $12 million per year, all oncredit terms calling for payment within 30 days, and its accounts receivable are $1.5 million.What is Leyton’s DSO, what would it be if all customers paid on time, and how much capitalwould be released if Leyton could take action that led to on-time payments?
Leyton Lumber Company has sales of $11 million per year, all on credit terms calling for payment within 30 days, and its accounts receivable are $1.43 million. Assume 365 days in year for your calculations. What is Leyton's DSO? Round your answer to two decimal places. days What would DSO be if all customers paid on time? Do not round intermediate calculations. Round your answer to two decimal places. days How much capital would be released if Leyton could take actions that led to on-time payments? Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000. Do not round intermediate calculations. Round your answer to the nearest cent.$
Leyton Lumber Company has sales of $10 million per year, all on credit terms calling for payment within 30 days, and its accounts receivable are $2.25 million. Assume 365 days in year for your calculations. What is Leyton's DSO? Do not round intermediate calculations.Round your answer to two decimal places. days What would DSO be if all customers paid on time? Do not round intermediate calculations. Round your answer to two decimal places. days How much capital would be released if Leyton could take actions that led to on-time payments? Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000. Do not round intermediate calculations. Round your answer to the nearest cent.$
By using a lock box system, a firm is able to reduce its float by 3 days. Given an annual interest rate of 3% and annual collections of $350 million, what is the projected annual interest earned by using the lock box? (Assume a 365-day year.)
A company has annual credit sales of €10 million, and a cost of capital of 7%. At present the company's debtors take on average 45 days to pay for goods bought on credit. The company is considering a discount scheme which it estimates would reduce the period taken by customers to 25 days. Based on the limited information above, what would be the net effect of the proposed discount scheme on the company's profit and loss in a given year? Assume 360 days in a year. Saving of €555,556 Saving of €48,611 Saving of €38,889 Saving of €1,000
Sparkling Water Ltd, expects to sell 8 million bottles of drinking water each year inperpetuity. This year each bottle will sell for 3.25 cedis in real terms and will cost 1.80 cedisin real terms. Sales income and costs occur at year end. Revenues will rise at real rate of 10%annually, while real costs will rise at real rate of 10% annually. The real discount rate is 20%.The corporate tax rate is 25%. What is Sparkling worth today.
The company has sales of $ 10 million per year, all of which are from credit terms that require payment to be made within 30 days, and the company's account receivables amount to $ 2 million. What is the DSO of the company, what is the value if all borrowers pay on time, and how much capital will be released if the company takes actions that lead to timely payment?
Income from sales of certain hardened steel connectors was P400,000 in the ﬁrst quarter, P410,000 in the second, and amounts increasing by 10,000 per quarter through year 4. What is the equivalent uniform amount per quarter if the interest rate is 12% per year compounded quarterly? Please show the solution. Solutions in excel are acceptable.
Carla Vista Design has daily sales of $54,000. The financial management team has determined that a lockbox would reduce the collection time by 1.7 days. Assuming the company can earn 4.1 percent interest per year, what are the savings from the lockbox? (Round answer to 2 decimal places, e.g. 12.25.) what is the Savings from the lockbox per year?
How much would a company have to invest now in order to sufficiently provide for annual payments of $313,000 over a 8-year period? Assume the interest rate is 12% per year.
Hurkin Manufacturing Company pays accounts payable on the tenth day after purchase. The average collection period is 30 days, and the average age of inventory is 40 days. The firm currently has annual sales of about $18 million and purchases of $14 million. The firm is considering a plan that would stretch its accounts payable by 20 days. If the firm pays 12% per year for its resource investment, what annual savings can it realize by this plan? Assume a 360- day year.
Suppose that the forward rate today for the period between 1 year and 2 years in the future is 7% (with annual compounding) and that sometime ago a company entered into an FRA where it will receive 5% (with annual compounding) and pay SOFR (market rate) on a principal of $100 million for the period. Today the 2-year zero rate rate is 6.5%. What is the value of the FRA this company has entered into to get paid 5%, now that the forward rates have gone from 5% to now being 7%?