Question
J. Walker Manufacturing Co. is financially distressed and must pay cash before delivery for its raw materials. It pays $40 per assembly at the time
J. Walker Manufacturing Co. is financially distressed and must pay cash before delivery for its raw materials. It pays $40 per assembly at the time of order. The parts are received 30 days after the order. Five days after they are received they are taken out of inventory and used in the manufacturing process. Walker incurs additional processing costs of $6.5 per assembly at the point in time when it manufactures its finished products. On average, it sells each finished assembly 95 days after manufacturing takes place.
c. Now assume that Walker decides to sell the finished goods for $48.50. How high could the discount rate be for Walker to still break even on a present value basis? You may use the Goal Seek command in the Tools menu in Microsoft Excel. (PLEASE USE Goal Seek ON EXCEL PLEASE SHOE SPREADSHEET
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