Capers Inc. has just promoted you to Chief financial officer. Since this is a new office in the company you are understaffed and many of the
responsibilities have been assigned to you.

The first task you have been assigned concerns the cash conversion cycle. Your boss has asked that you examine the following data:

The second task concerns the cost of bank loans under differing conditions. Specifically:

Required:

Part Two: Cash Budget

Capers Inc. is developing its cash budget for the next year. Of Capers%u2019 sales 20% is for cash another 60% is collected in the month
following sale and 20% is collected in the second month following sale. November and December sales for 2010 were $229000 and $250000 respectively.

Capers%u2019 purchases its raw materials two months in advance of its sales equal to 70% of its final sales price. The supplier is paid one
month after it makes delivery. For example purchases for April sales are made in February and payment is made in March.

In addition Capers pays $10000 per month for rent and $20000 each month for other expenditures. Tax prepayments for $32000 are made each
quarter beginning in March.

The company%u2019s cash balance at December 31 2010 was $26000 and minimum balance of $25000 must be maintained at all times. Assume that
any short-term financing needed to maintain cash balance would be paid off in the month following the month of financing if sufficient funds are
available.

Interest on short-term loans (12%) is paid monthly. Borrowing to meet estimated monthly cash needs takes place at the beginning of the month.
For example if in the month of April the firm expects to have a need for an additional $60500 these funds would be borrowed at the beginning of April with
interest of $605 (.12 x 1/12 x $60500) owed for April and paid at the beginning of May.

Sales for Capers Inc.:

January

$229000

February

$250000

March

$270000

April

$275000

May

$280000

June

$290000

July

$280000

August

$260000

Required:

Part Three: EOQ

Capers Inc. is also initiating an inventory management program using EOQ. Capers needs fastener supplies to manufacture its products. The CFO
estimates that the company will need about 250000 cases next year. The cost of storing cases is about $1.10 each. The ordering cost is $400 for a
shipment.

Required:

Deliverables: