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Calculating Float. You have $$35,400$ on deposit with no outstanding checks or uncleared

deposits. One day you write a check for $$4,700$ and then deposit a check for $$6,300.$ What are

your disbursement, collection, and net floats?

Size of Accounts Receivable. The Johnson Corporation has annual credit sales of $$31$ million.

The average collection period is $33$ days. What is the average investment in accounts receivable

as shown on the balance sheet?

Terms of Sale. A firm offers terms of $\frac{2}{15},$ net $40.$ What effective annual interest rate doe the

firm earn when a customer does not take the discount? Without doing any calculations, explain

what will happen to this effective rate if:

a$.$ The discount is changed to $3$ percent

b$.$ The credit period is increased to $60$ days.

c$.$ The discount period is increased to $20$ days.

d$.$ What is the EAR for each scenario?

Safety Stocks and Order Points. Sache, 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 place, it

takes three days for Sache 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 Sache place its next order?

Agency Issues. It is sometimes argued that excess cash held by a firm can aggravate agency

problems $($discussed in Chapter $1)$ and more generally, reduce incentives for shareholder wealth

maximization. How would you frame the issue here?

Use of Excess Cash. One options a firm usually has with any excess cash is to pay its suppliers

more quickly. What are the advantages and disadvantages of this use of excess cash?

Use of Excess Cash. Another option usually available for dealing with excess cash is to reduce

the firm's outstanding debt. What are the advantages and disadvantages of the use of excess

cash?

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