ABC is deciding if credit should be extended to its customers. It has determined that there is a 95% probability that it would collect the full payment from a credit sale in one month. The receivable is financed at an APR of 7.10%. On credit sales of $3,000 per unit, the present value of costs are expected to be 84.50% of the sales price. What is the present value of the expected profit on the sale of each unit? Explain with all steps a.-$16.76 b.-$166.76 c.$126.06 d.$254.90 e.$298.24

Q: The firm's average accounts receivable balance is P2.5 million, and they are financed by a bank loan…

A: In the given question, the annual savings in interest cost will be compared with the annual cost of…

Q: Mahrouq Technologies buys $12,726,823 of materials (net of discounts) on terms of 1/30, net 60, and…

A: Normal cost of trade credit can be calculated by using this equation Normal cost of trade credit…

Q: Suncoast Boats Inc. estimates that because of seasonal nature of its business, it will borrow…

A: Loan is a contract between two parties the lender and the borrower of the finance. This contract of…

Q: Limitless Styles has a 45 day accounts payable period. The firm has expected sales of $900, $1,200,…

A: Account payable period = 45 days Cost of goods sold = 70% of next quarter sales sales of quarter 3rd…

Q: The Snedecker Corporation is considering a change in its cash-only policy. The new terms would be…

A: = Sales*(selling price- cost price) = 2,150*(53-31)= 47,300

Q: In evaluating a proposal to extend credit , new customers will generate an average of $19000 per day…

A: Net profit = Sales less COGS less administration expense

Q: 1. XYZ Company sells books to universities. The company policy is to sell 60% cash and the rest in a…

A: The difference between a company's total revenue and total costs over a given period is known as…

Q: Kitchen Enterprises is evaluating a proposal to  lengthen its credit period from 30 to 45 days. All…

A: Accounts receivables are those customer accounts to whom business has made credit sales on account…

Q: Macy's Design has daily sales of $42,000. The financial management team has determined that a…

A: Cash flows are the cash generated from the operation of the business organization. In other words,…

Q: Use 360 days in a year. Solutions must be complete (including formulas). Present rates in percent…

A: Discount is a selling goods or service below the price of goods. This reduction in price is offered…

Q: Gallant Sdn. Bhd., offers a credit period of 4 weeks.  The price and cost per unit of its product…

A: Since you have posted more than 3 sub-parts, we will provide the solution only to the first three…

Q: In evaluating a proposal to extend credit , new customers will generate an average of $11000 per day…

A: Net present value (NPV) is a capital budgeting technique which helps a management in evaluating the…

Q: ABC Co has sales of $76m for the previous year. Receivables days are 58 and receivables are financed…

A: Accounts Receivables represents the amount the customers owe to the corporation on the account of…

Q: In evaluating a proposal to extend credit , new customers will generate an average of $13000 per day…

A: Net present value refers to the difference between the present value of all cash inflows of all cash…

Q: The APY of a credit card is 62% per year. Payments are monthly. What is the APR of this car.

A: APY stands for Annual Percentage Yield and it is a standardized way of representing the interest or…

Q: Suppose that LilyMac Photography has annual sales of $230,000, cost of goods sold of $165,000,…

A: FIRM OPERATING CYCLE Firm Operating Cycle is the Total of Account Receivable Collection Period &…

Q: The Milton Company currently purchases an average of $25,000 per day in raw materials on credit…

A: 1. Calculate the current level of trade credit:

Q: Dome Metals has credit sales of $198,000 yearly with credit terms of net 120 days, which is also the…

A: Increase in profit = Current sales* increase in sales%= 198,000*20%*25% = 9,900Old accounts…

Q: Osborne Supply Company has credit sales of $2M per year. Collections average $8000 per day. Assume…

A: In the given problem, the internal processing time is reduced by 1 day, as a result of which the…

Q: Suppose you sell8000 of the 3 pack of lenses in one year. your cost on each 3 pack is $29.95 and you…

A: Net income  includes both operating and non-operating income. Non operating income is the income…

Q: ACE Design has daily sales of $52,000. The financial management team has determined that a lockbox…

A: By reducing collection time by 2.9 days, the cash balance will be increased by = daily sales x…

Q: Ivanhoe Traders has annual sales of $1,600,000. The firm's financial manager has determined that…

A: Cash management focuses on the efficient collection, and investment of cash within a company.…

Q: NATO Co.’s business is booming, and it needs to raise more capital.  The company purchases supplies…

A: Here, Discount Rate is 1% Days of Discount is 10 days Days of Payment without adverse effect is 30…

Q: Your company forecasts that next year's sales will be $67.00 million and the Days Sales Outstanding…

A: Days Sales Outstanding (DSO): It refers to the time taken by the company in receiving money or…

Q: Bulldogs Inc. has a variable cost ratio of 20% and a 10% receivable financing cost. The firm is…

A:

Q: Johnson Electronics is considering extending trade credit to some customers previously considered…

A: Incremental income refers to the additional income generated as a result of a specific action or…

Q: Illustration: A company sells $50,000 of goods with the terms net/30. The receivable is immediately…

A: Sales price = $50,000 Factor fee = 3% Interest = 10% reserve = 8%

Q: Your firm needs to purchase 8,000 safety vests from a supplier. One supplier demands a payment of…

A: Present value is an estimate of the expected monetary value of future cash flows. Investors evaluate…

Q: What is the total interest paid to the nearest cent if the car costs $36,915, your down payment is…

A: A credit score is a metric which shows the ability of a person or an organisation to repay its debt…

Q: London Motors will sell a $16,949 car for $335 per month for 60 months. What is the interest rate?

A: We use Rate function to calculate interest rate

Q: Wontaby Ltd. is extending its credit terms from 30 to 45 days. Sales are expected to increase from…

A: The additional financial requirement will be multiplied by the cost of acquiring additional funds…

Q: he Milton Company currently purchases an average of $18,000 per day in raw materials on credit terms…

A: When a company purchases goods on credit, the seller specifies the terms of payment on the invoice.…

Q: Global Services is considering a promotional campaign that will increase annual credit sales by…

A: The formula used to determine the investments is as follows:Investments = Sales / Respective…

Q: Peanut Inc. is evaluating whether to change its credit terms from 2/10 net 30 to 3/10 net 30. At…

A: Account receivables (AR) is current assets (CA) for the firm. To make effective collections and…

Q: Assume you are thinking about starting a business and would like to forecast your cash needs for the…

A: Cash budget: Cash budgeting can be outlined as a budget prepare to estimate the relevant money…

Q: A commercial bill with a face value of $50 000 has a current price of $49,291. This bill is trading…

A: Maturity refers to a period at which the bills or bonds retire. This is the period to which the…

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.