Farmers World, a firm specializing in fertilizers, is evaluating a proposalto relax the credit standards to increase sales. The implemen- tation ofthis plan is expected to increase sales by 10% from 15,500 to 17,050units in the following year. The average collection period will increasefrom 30 to 45 days, and bad debts are expected to increase from 2% to5% of sales. The selling price per bag is $15, and the variable cost perbag is $12. The required rate of return on equal-risk investments is 22%.Should the proposed plan be implemented? Explain the financial impact.(Note: Assume a 365-day year.)ExercisesJanuaryFebruaryMarchDynabase Tool has forecast its total funds requirements for the coming year as shown in the following table.MonthMonthAmountAprilMayJuneExercisesAmount$2,000,0002,000,0002,000,0004,000,0006,000,0009,000,000JulyAugustSeptemberOctoberNovemberDecember$12,000,00014,000,0009,000,0005,000,0004,000,0003,000,00016a. Divide the firm's monthly funds requirement into (1) a permanent component and (2) a seasonalcomponent, and find the monthly average for each of these components.b. Describe the amount of long-term and short-term financing used to meet the total funds requirement under(1) an aggressive funding strategy and (2) a con- servative funding strategy. Assume that, under the aggressivestrategy, long-term funds finance permanent needs and short-term funds are used to finance seasonal needs.c. Assuming that short-term funds cost 5% annually and that the cost of long-term funds is 10% annually, usethe averages found in part a to calculate the total cost of each of the strategies described in part b. Assume that

According to bartleby guidelines , If multiple questions are asked , then 1st question needs to be…

Farmers World, a firm specializing in fertilizers, is evaluating a proposal to relax the credit standards to increase sales. The implemen- tation of this plan is expected to increase sales by 10% from 15,500 to 17,050 units in the following year. The average collection period will increase from 30 to 45 days, and bad debts are expected to increase from 2% to 5% of sales. The selling price per bag is $15, and the variable cost per bag is $12. The required rate of return on equal-risk investments is 22%. Should the proposed plan be implemented? Explain the financial impact. (Note: Assume a 365-day year.)

Farmers World, a firm specializing in fertilizers, is evaluating a proposal to relax the credit standards to increase sales. The implemen- tation of this plan is expected to increase sales by 10% from 15,500 to 17,050 units in the following year. The average collection period will increase from 30 to 45 days, and bad debts are expected to increase from 2% to 5% of sales. The selling price per bag is $15, and the variable cost per bag is $12. The required rate of return on equal-risk investments is 22%. Should the proposed plan be implemented? Explain the financial impact. (Note: Assume a 365-day year.)

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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