1) Enjam Loving, Inc., is considering two mutually exclusive projects. Project A and Project B both have the initial outlay of $500. Cash flows from project A (in dollars) are: 100 in year 1, 200 in year 2, 300 in year 3 and 400 in year 4. Project B pays 400 dollars in year 1, 300 dollars in year 2, 200 dollars in year 3 and 100 dollars in year 4. Loving utilizes both NPV and Simple payback period criterion for decision making. Supposing the cost of capital of 6%, which project would company choose?
2) Assume that Dunn Industries has annual sales of $2.3 million, cost of goods sold of $1,650,000, average inventories of $1,116,000, and average accounts receivable of $750,000. Suppose that all of Dunn’s sales are on credit.
i) What will be the firm’s operating cycle?