Working capital investment | Business & Finance homework help

Problem 166

Working capital investment

Prestopino Corporation produces motorcycle batteries. Prestopino turns out 2,200 batteries a

day at a cost of $4 per battery for materials and labor. It takes the firm 22 days to convert

raw materials into a battery. Prestopino allows its customers 40 days in which to pay for the

batteries, and the firm generally pays its suppliers in 30 days. Assume 365 days in year for

your calculations.

a. What is the length of Prestopino’s cash conversion cycle? Round your answer to two

decimal places.

days

b. At a steady state in which Prestopino produces 2,200 batteries a day, what amount of

working capital must it finance? Round your answer to the nearest cent.

$

c. By what amount could Prestopino reduce its working capital financing needs if it was able

to stretch its payables deferral period to 36 days? Round your answer to the nearest cent.

$

d. Prestopino’s management is trying to analyze the effect of a proposed new production

process on its working capital investment. The new production process would allow

Prestopino to decrease its inventory conversion period to 15 days and to increase its daily

production to 2,450 batteries. However, the new process would cause the cost of

materials and labor to increase to $9. Assuming the change does not affect the average

collection period (40 days) or the payables deferral period (30 days), what will be the

length of its cash conversion cycle and its working capital financing requirement if the

new production process is implemented? Round your answers to two decimal places.

Cash conversion cycle  _ _ ?        days

Working capital financing $ ?

 

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more