Corporate Finance Week 5
Course Project
Capers, Inc. has just promoted you to Chief financial officer. Since this is a new office in the company, you are understaffed and many of the responsibilities have been assigned to you.
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The first task you have been assigned concerns the cash conversion cycle. Your boss has asked that you examine the following data:
- Inventory conversion period is 60 days
- Payables deferral period is 30 days
- Payables deferral period is 30 days
The second task concerns the cost of bank loans under differing conditions. Specifically:
- The company needs $1,500,000 for a new project.
- The loan will cost 10% simple interest, for 4 months,with a 20% compensating balance.
Tasks:
- Analyze what is the firm’s cash conversion cycle.
- Evaluate how many times per year are the firm’s inventory turnover, if sales are $4,000,000 per year.
- If sales are all credit sales and amount to $4,000,000 per year, what is the firm’s average investment in receivables?
- What is the nominal interest rate on the loan? What does this mean?
- Justify if you feel the company has a successful cash conversion cycle.
Submission Details:
- Submit a 3-4 page Microsoft Word document, using APA style.
- Name your file: SU_FIN3030_W5_CP_LastName_FirstInitial.doc
- Submit your assignment to the Submissions Area by the due date assigned.
