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NaomiD519
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Two-Part PS #9 - why do both conditions apply to part 2?

by NaomiD519 Thu Jan 01, 2015 7:26 pm

For the question from the problem set, the first part early indicates the additional constraint of "without losing business," meaning that 35% of the receivables owed from customers cannot be claimed. The second part, however, only states that we are looking for the minimum amount needed from non-cash assets, so I didn't think the aforementioned constraint would apply to the second question, although the solution shows that it does. How do I know this for sure based on the wording of the question?

Question:
Ankor Inc. will have to file for bankruptcy if it cannot make a $60 million interest payment due in one week. The company currently has $18 million in cash reserves, $56 million due from customers, and $33 million in other non-cash assets; the company has no other resources. The company must keep at least $4 million cash on hand in order to continue operating. If Ankor demands immediate payment from customers, the company’s CFO estimates that any one customer will be able to repay no more than 70% of its outstanding balance within one week. The largest customer, responsible for 35% of the total due, will be upset if immediate payment is demanded and will reduce future purchases.

Identify the maximum amount of money Ankor can hope to raise from customers within one week without losing business and the minimum that it must raise from its “other non-cash” assets. Make only two selections, one in each column.
BharatG510
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Re: Two-Part PS #9 - why do both conditions apply to part 2?

by BharatG510 Tue Jan 06, 2015 11:55 am

the condition given here are global in nature. It will never be the case that they will ask us to assume something.

maximum amount of money = 23.52 million $

minimum that it must raise from its “other non-cash” assets = 18.5$(~19$)
NaomiD519
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Re: Two-Part PS #9 - why do both conditions apply to part 2?

by NaomiD519 Thu Jan 08, 2015 5:07 pm

You don't have to assume anything anyway. They 2 questions:
1) Find number that fulfills condition A
2) Find number that fulfills condition B

Why does condition A apply to condition B?
tim
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Re: Two-Part PS #9 - why do both conditions apply to part 2?

by tim Sun Jan 18, 2015 12:23 am

Look carefully at the wording. If you don't believe "without losing business" applies to the second half of the question, you must also believe "within one week" doesn't apply either. To do so, however, would make the question meaningless.
Tim Sanders
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