1) A company purchased inventory worth of $2280 in March. At the end of March it had inventory balance worth $456. Calculate March balance fraction.
2) A credit analyst has received a $10,000 order from a new customer. The cost of filling the order (i.e., COGS) is $8,000 and collection costs are $200. The credit analyst notes that the COGS will be paid immediately. Further, it is assumed that the customer will repay the trade credit obligation in 60 days. It is also assumed that the collection costs will be incurred in 60 days. If the appropriate discount rate is 8%, what is the NPV of extending credit to the new customer?
3) A credit analyst has received a $20,000 order from a new customer. The cost of filling the order (i.e., COGS) is $19,100 and collection costs are $500. The credit analyst notes that the COGS will be paid immediately. Further, it is assumed that the customer will repay the trade credit obligation in 90 days. It is also assumed that the collection costs will be incurred in 90 days. If the appropriate discount rate is 10%, what is the NPV of extending credit to the new customer?
4) East Stores has derived the following consumer credit scoring model:
Y=0.2*Employment + 0.4*Homeowner + 0.3*Cards
Employment=1 if employed full time, 0.5 if employed part-time, and 0 if unemployed;
Homeowner=1 if homeowner, 0 otherwise
Cards=1 if presently has 1-5 credit cards, 0 otherwise
The store determines that a score of at least 0.7 indicates a very good credit risk, and it will extend credit to the individuals. If Janice is employed half time, is a homeowner, and has 2 credit cards at present, does the model indicate she should receive credit?
5) Emily Cheney is evaluating a proposal to extend credit to a group of new customers. The new customers will generate an average of $40,000 per day in new sales. On average, they will pay in 68 days. The variable cost ratio is 80%, collection expenses are 2% of sales, and the cost of capital is 10%. What is the NPV of one day's sales if Emily grants credit? Assume that there is no bad debt loss.