1. If the accounts receivable balance on a firm's balance sheet decreases without any change in credit sales, the operating cycle will:
a. increase due to the increased receivables turnover rate.
b. decrease because the number of days' sales in receivables will decrease.
c. remain constant because credit sales are constant.
d. remain constant because the accounts receivable and inventory periods will be constant.
e. remain constant because cash collections affect the cash cycle, not the operating cycle
2. A company has a proposed 2-year project with the cash flows shown below and would like to calculate the NPV of this project so that they can decide whether to pursue the project or not. The company has a target capital structure of 60% equity and 40% debt. The beta for this firms stock is 1.2, the risk-free rate is 4.5, and the expected market risk premium is 6.5%. The bonds for this company pay interest semiannually and have a coupon interest rate of 7%, 14 years to maturity, a face value of $1,000, and a current price of 1,117.47. If the corporate tax rate is 36%, what is the NPV of the proposed project for this firm? (Answer to the nearest dollar, but do not use a dollar sign).
Years 0
Cashflows -5,000
Years 1
Cashflows 1,000
Years 2
Casflows 2,000