Pinon Corporation (U.S.) operates subsidiaries in Brazil and Indonesia. In the United States Pion typically requires ($

Pinon Corporation (U.S.) operates subsidiaries in Brazil and Indonesia. In the United States Piñon typically requires \(\$ 1,000,000\) in accounts receivable and \(\$ 162,500\) in inventory to support \(\$ 12.000,000\) in sales. Piñon's gross markup over inventory cost is \(331 / 3 \%\). A similar markup is used by the two affiliates.

Pinon's marketing department reports that the firm should be able to sell an additional \(\$ 2,400,000\) in Brazil and an additional \(\$ 1,500,000 \mathrm{in}\) Indonesia next year. Before preparing operating budgets for its Brazilian and Indonesian affiliates, Pinon's chief financial officer asked chief financial officers in the two countries to report on local payment customs and inventory needs. The Brazilian officer reported that customers in Brazil normally took three months to pay, and that a two month supply of inventory was necessary because of the possibility of shipping delays due to strikes by longshoremen. In Indonesia the average collection period was reported to be four months, and a three-month supply of inventory was necessary.

Net working capital is defined here to mean current assets (cash, accounts reccivable, and inventory) less current liabilities (accounts payable).

a. What are the days sales outstanding (DSO) of the three different units?

b. What is the required net working capital position of the three unirs?

c. What is the fundamental working capital difference among the three countrics?

d. What additional investment, if any, will be needed for the following year in the two affiliates?

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Sales Cash $12,000,000 United States Brazil Indonesia $1,500,000 $2,400,000 $400,000 $80,000 $50,000 A/R $1,000,000 3 months 4 months Inventory $162,500 2 months 3 months A/P $800,000 3 months 6 months