1.Suppose it takes a computer manufacturer 10 days to build and sell computers. Also suppose it takes the firms customers 30 days, on average, to pay for the computers after they have purchased them on credit. Finally, suppose the firm is able to delay paying for the computer parts it uses in the manufacturing process for 20 days. Given these conditions, how long is the firms cash conversion cycle.

2. Suppose your firm buys $1,000 worth of supplies on credit with terms 3/15 n60.

a. What does 3/15 n60 mean?

b. If you pay the bill on the 14^th day after the purchase, what is the cost of the trade credit you have used for the 14-day period?

c. If you pay the bill on the 50^th day after the purchase, what is the cost of the trade credit you have used for the 35-day period after the discount period ended?

3. If your firm buys $1,000 worth of supplies on credit with terms 3/15 n60 and pays the bill on the 60^th day after the purchase:

a. What is the approximate, or nominal, cost of trade credit as an annual rate?

b. What is the exact cost of trade credit as an annual rate?