Exam 21: Mergers, Acquisitions, and Corporate Control

What approximate value should a firm put on being able to permanently reduce the length of its collection period by one day if annual sales (all on credit) are $5,000,000 and the appropriate opportunity cost is 10 percent annually?

The reason for firms to use remote disbursements is:

What is the average inventory level, based on EOQ, for a firm that has annual sales of 2,500 units, costs per order of $45, and carrying costs of $5 per unit?

A firm that is located in Toronto receives on the average 2,000 cheques a day from its customers in the Vancouver area.Average payment per cheque is $1,500.A bank in Vancouver is offering a lock-box arrangement for collection and processing of these cheques at a cost of $0.50 per cheque.This arrangement will reduce the float by two days.The daily interest rate for the firm is 0.02 percent.What is the net saving from the lock-box arrangement?

Just-in-time inventory management is suitable for an aircraft manufacturer, like Boeing, whose production schedules are known well in advance.

Which of the following would not be included in inventory carrying cost?

A firm issued three cheques for $25,000, $15,000, and $13,000 on January 31, and deposited a $30,000 cheque into the bank account.None of the cheques were cleared by February 1.What is the net float from these transactions?

From the day a cheque is put in the mail, discuss the delays before it is credited or debited appropriately; e.g., discuss the issue from the perspective of both payer and recipient.

Which of the following statements is not true?

Which of the following is correct for a firm that places orders for an item in amounts greater than the economic order quantity?

Baumol's model is not suitable for a firm that experiences:

Show that your ledger balance plus payment float equals the bank's ledger balance, which in turn equals the available balance plus availability float.

Which of the following is correct about wire transfer of funds, given that wire transfer saves three days, the annual interest rate is 6 percent, and the cost of wire transfer is $20?

What are the cost and benefit of holding inventories?

A common characteristic of money market instruments is their high degree of liquidity.

With rates of return so low on money market instruments, does it actually benefit a firm to pay close attention to cash balances?

If a firm's availability float exceeds its payment float, then the firm has:

Baumol's model is not very useful in practical applications, because it does not allow for uncertain cash flows.

What is the total carrying cost for an inventory of 200 widgets if the per-widget carrying cost is $4, the cost per order is $14, and there are 5 orders per year?

What is the benefit for a firm with daily sales of $30,000 to be able to speed up collections by three days, assuming an 8 percent annual opportunity cost of funds?