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ERP 513: Treasury Management Assignment Week 1 _____________________________________________________________________________ Assignment Week 1 1.1. Jack works in the hardware section of a department store. A customer comes in and buys 3 gallons of paint and 7 brushes, and pays $69.96, including 6% sales tax. Another customer buys 2 gallons of paint and 3 brushes and pays $42.40, including sales tax. Find the price of a gallon of paint and that of a brush. Paint $16.40 per gallon, brushes $2.40 each 1.2. The cash flows from two projects under different states of the economy are as follows: State of the economy Probabilit Project A Project y B Poor 10% $13,000 $0 Average 20% $14,000 $7000 Good 70% $16,000 $16,000 Find the coefficient of correlation between the two projects. .9952 1.3. Stewart Company has cost of capital 14%. The following function represents the shortage cost for its net working capital S= for x > 9 Here S is the shortage cost in thousands of dollars, and x is the level of the net working capital, also in thousands of dollars. Find the following: (A) The optimum level of net working capital. (B) The financing cost, shortage cost, and total cost at the optimal point. (A) $13,629, (B) $1908, $533, $2441 per year 1.4. Granger Company's cost of capital is 13%. It has invested x (million dollars) in current assets. The following function represents the shortage cost of current assets S = 9 ex/5 Find the following: (A) The optimal level of current assets. (B) The shortage, financing, and total annual cost of these assets. (A) $13.140 million, (B) $650,000, $1.708 million, $2.358 million