Chương 13: Working Capital Management

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EX1: High-Rise Building Company uses 400,000 tons of stone per year. The carrying costs are $100/ton. The cost per order is $500. Calculate the optimal order size. 

EX2: ABC Company sells 6,760 machines per month. The carrying costs are $30/unit. The cost per order is $50. Calculate the optimal number of orders per year. Know that company operates 360 days a year.

a)    Calculate EOQ

b)    How many times does the company reorder?

c)    How long does an order last?

d)    Calculate total inventory cost

EX3:

On a $100 sale, with terms 5/10 net 60, what is the implied interest rate on the credit given?

EX4: The default rate of Don’s new customers has been running at 8%. The average sale for each new customer amounts to $1,500, generating a profit of $350. What is the expected profit from each new customer?

EX5: The default rate of Don’s new customers has been running at 8%. The average sale for each new customer amounts to $1,500, generating a profit of $350 and 50% chance of a repeat order next year. The default rate on repeat orders is only 3%. If interest rate is 6%, what is the expected profit from each new customer?