Question: Question 10: Analyze the cash conversion cycle for a retail company using the following data: Days Inventory Outstanding (DIO): 45 days Days Sales Outstanding (DSO):
Question 10:
Analyze the cash conversion cycle for a retail company using the following data:
- Days Inventory Outstanding (DIO): 45 days
- Days Sales Outstanding (DSO): 30 days
- Days Payables Outstanding (DPO): 60 days
Requirements:
- Calculate the Cash Conversion Cycle (CCC).
- Discuss the implications of the CCC for the company’s liquidity.
- Suggest strategies to improve the CCC.
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Question 1
A manufacturing company is considering a project that requires an initial investment of $200,000. The expected net cash flows for the project are given below. Assume the company's cost of capital is 8%. Calculate and comment on the project's NPV, IRR, and discounted payback period.
Year | Cash Flows | Discount Factor (8%) |
1 | $50,000 | 0.926 |
2 | $50,000 | 0.857 |
3 | $50,000 | 0.794 |
4 | $60,000 | 0.735 |
5 | $60,000 | 0.681 |
Salvage Value | $30,000 | 0.681 |
Requirements:
- Calculate the Net Present Value (NPV).
- Determine the Internal Rate of Return (IRR).
- Compute the discounted payback period.
- Provide a brief commentary on the investment decision based on NPV and IRR.
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