Use the following information on ABC Company for questions #1 to #8.

ABC Company has the following financial information for 2018:

Total current assets: $2,200,000

Total current liabilities: $1,200,000

Cash: $300,000

Inventory: $1,000,000

Accounts Receivable: $800,000

Accounts Payable: $500,000

Net sales is $10,000,000

Variable cost (VCR) is 30% of sales

Cost of Goods Sold (COGS) at 40% of sales

Average daily cash flow $27,000

Standard deviation of cash flow is $40,000

Its ROE is 25%

Total earnings of $500,000, dividend payout of $150,000.

Its cost of capital is 7%

Line of credit available: $500,000

Its credit terms from supplier is Net 35 (DPO)

Its credit terms to customer is Net 45 (DSO)

Expenses for credit administration and collection is 5% of sales EXP(.05/CP)

Daily interest rate (i) is 7%/365

Collection period for sale is 45 days (CP)

It makes the following forecast for 2019:

Revenues increase by 10% from 2018 level;

Receivables will be 8% of revenues;

Inventory will equal to 10% of revenues;

Payables are expected at 5% of revenues.

2>NPV of sales calculations:

A) Calculate the variable cost (VCR) of 2018 sales

a) Calculate the present value of 2018 sales using the 45 days credit term

b) Calculate the NPV of the this sales