Miyagi Data, Inc., sells earnings forecasts for Japanese securities. Its credit terms are3/20, net 40. Based on experience, 65 percent of all customers will take the discount.a. What is the average collection period? (Do not round intermediate calculations andround your answer to 2 decimal places, 32.16.)b. If the company sells 1,250 forecasts every month at a price of $2,350 each, what is itsaverage daily balance sheet amount in accounts receivable? (Do not roundintermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)Answer is complete but not entirely correct.a.Average collection periodb. Average accounts receivable)$17 days1,542,575.34

Credit Term of 3/20, Net 40 shows that buyers will get discount of 3% if payment is made in 20 days…

Answered: Miyagi Data, Inc., sells earnings…

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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Pets Store Inc. sells on terms of 3/20, net 35. What is the effective annual cost of trade credit under these terms? Use a 365-day year. Round answer to two decimal places.
If a firm has sales of $21,752,000 a year, and the average collection period for the industry is 45 days, what should this firm’s accounts receivable be if the firm is comparable to the industry? Assume there are 365 days in a year. Do not round intermediate calculations. Round your answer to the nearest dollar.
Kyoto Joe, Inc., sells earnings forecasts for Japanese securities. Its credit terms are 2/15, net 90. Based on experience, 80 percent of all customers will take the discount. What is the average collection period for the company? (Use 365 days a year. Do not round intermediate calculations.) If the company sells 1,240 forecasts every month at a price of $1,850 each, what is its average balance sheet amount in accounts receivable? (Use 365 days a year. Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234, 567.89.) a. Average collection period? daysb. Average balance?
Cost of Trade Credit Grunewald Industries sells on terms of 2/10, net 50. Gross sales last year were $4,526,000 and accounts receivable averaged $434,000. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald's nondiscount customers? (Hint: Calculate daily sales based on a 365-day year, calculate the average receivables for discount customers, and then find the DSO for the nondiscount customers.) Do not round intermediate calculations. Round your answers to two decimal places. Nominal cost of trade credit: % Effective cost of trade credit: %
Black Panther Inc. buys on terms of 2/15, net 60 days. It does not take discounts, and it typically pays on time, 60 days after the invoice date. Net purchases amount to P450,000 per year. On average, how much “free” trade credit does the firm receive during the year? (Assume a 365-day year, and note that purchases are net of discounts.)
Receivables Investment Snider Industries sells on terms of 2/10, net 45. Total sales for the year are $1,300,000. Thirty percent of customers pay on the 10th day and take discounts; the other 70% pay, on average, 50 days after their purchases. Assume a 365-day year. What is the days sales outstanding? Do not round intermediate calculations. Round your answer to the nearest whole number. days What is the average amount of receivables? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What would happen to average receivables if Snider toughened its collection policy with the result that all nondiscount customers paid on the 45th day? Do not round intermediate calculations. Round your answer to the nearest dollar. $
Aggarwal Inc. buys on terms of 1/10, net 20, and it always pays on the 20th day. The CFO calculates that the average amount of costly trade credit carried is $750,000. What is the firm's average accounts payable balance? Assume a 365-day year. a. $1,000,000 b. $1,492,500 c. $1,500,000 d. $1,125,000 e. $1,113,750
Cook Security Systems has a $37,500 line of credit, which charges an annual percentage rate of prime rate plus 4%. The starting balance on October 1 was $9,100. On October 4 they made a payment of $1,400. On October 13 the business borrowed $2,100, and on October 19 they borrowed $4,800. If the current prime rate is 8%, what is the new balance (in $)? (Round your answer to the nearest cent.)
Bumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 4/10, net 65. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its non-free trade credit? (Assume a 365-day year.) a. 21.98% b. 27.65% c. 29.49% d. 31.12% e. 28.46%
Receivables Investment Snider Industries sells on terms of 2/10, net 35. Total sales for the year are $1,400,000. Thirty percent of customers pay on the 10th day and take discounts; the other 70% pay, on average, 40 days after their purchases. Assume a 365-day year. What is the days sales outstanding? Do not round intermediate calculations. Round your answer to the nearest whole number. days What is the average amount of receivables? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What would happen to average receivables if Snider toughened its collection policy with the result that all nondiscount customers paid on the 35th day? Do not round intermediate calculations. Round your answer to the nearest dollar. $
Cook Security Systems has a $37,500 line of credit, which charges an annual percentage rate of prime rate plus 4%. The starting balance on October 1 was $9,300. On October 4 they made a payment of $1,800. On October 13 the business borrowed $2,500, and on October 19 they borrowed $4,400. If the current prime rate is 6%, what is the new balance (in $)? (Round your answer to the nearest cent.) $ 11,145.48
Cook Security Systems has a $37,500 line of credit, which charges an annual percentage rate of prime rate plus 4%. The starting balance on October 1 was $9,100. On October 4 they made a payment of $1,400. On October 13 the business borrowed $2,900, and on October 19 they borrowed $4,200. If the current prime rate is 8%, what is the new balance (in $)? (Round your answer to the nearest cent.) $

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