Company A carries out its sales with a net maturity of 45 days, and is considering increasing this maturity to 75 days due to the slowdown in the economy. The company's current annual sales are 6,500. The Company believes that the maturity extension will increase sales by 12%. The gross profit margin of the business is 17% and the market interest rate is 25%. (Year 360 days) 1) What is the additional income that will provide the maturity extension? a) 256.9 b) 132.6 c) 542.7 d) 10.2 f) 425.5 2) What is the additional cost of the maturity extension to the company?; a) 176.04 b) 56.70 c) 102.25 d) 102.25 f) 15.60 3) Should the business extend the maturity or not?
Company A carries out its sales with a net maturity of 45 days, and is considering increasing this maturity to 75 days due to the slowdown in the economy. The company's current annual sales are 6,500. The Company believes that the maturity extension will increase sales by 12%. The gross profit margin of the business is 17% and the market interest rate is 25%. (Year 360 days) 1) What is the additional income that will provide the maturity extension? a) 256.9 b) 132.6 c) 542.7 d) 10.2 f) 425.5 2) What is the additional cost of the maturity extension to the company?; a) 176.04 b) 56.70 c) 102.25 d) 102.25 f) 15.60 3) Should the business extend the maturity or not?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Company A carries out its sales with a net maturity of 45 days, and is considering increasing this maturity to 75 days due to the slowdown in the economy. The company's current annual sales are 6,500. The Company believes that the maturity extension will increase sales by 12%. The gross profit margin of the business is 17% and the market interest rate is 25%. (Year 360 days)
1) What is the additional income that will provide the maturity extension?
a) 256.9
b) 132.6
c) 542.7
d) 10.2
f) 425.5
2) What is the additional cost of the maturity extension to the company?;
a) 176.04
b) 56.70
c) 102.25
d) 102.25
f) 15.60
3) Should the business extend the maturity or not?
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