The Berry Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is2.5% per period.Price per unitCost per unitUnit sales per monthNPVCurrent Policy New Policy$$$383,280Calculate the NPV of the decision to change credit policies. (Omit "$" sign In your response. Negative answer should be Indicatedby a minus sign.)383,398

NPV is the dollar return of the change in credit policy. If the NPV is positive that means the…

The Berry Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2.5% per period. Price per unit Cost per unit Unit sales per month Current Policy New Policy $ 73 $ 75 $ 38 $ 38 3,280 3,390 Calculate the NPV of the decision to change credit policies. (Omit "$" sign In your response. Negative answer should be Indicated by a minus sign.) NPV $

The Berry Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2.5% per period. Price per unit Cost per unit Unit sales per month Current Policy New Policy $ 73 $ 75 $ 38 $ 38 3,280 3,390 Calculate the NPV of the decision to change credit policies. (Omit "$" sign In your response. Negative answer should be Indicated by a minus sign.) NPV $

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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Little Kimi Clothiers can borrow from its bank at 18 percent to take a cash discount. The terms of the cash discount are 2/18 net 55. a. Compute the cost of not taking the cash discount. (Use 365 days in a year. Do not round the intermediate calculations. Round the final answer to 2 decimal places.) Cost of not taking a cash discount b. Should the firm borrow the funds? % Yes ○ No
Loans that are used to fill a gap in the time until a specific event occurs are called a. evergreen facilities b. bridge loans. c. term loans d. floor plans. If a bank has gross charge-offs of $25 for the current year, recoveries of $40, and provision for loan losses of $30, how much will the reserve for loan losses change? a. $45 b. $+15 c. none of the above. d. $-15 Which of the following is a non-installment loans? There may be more than one correct answer. a. term loan b. single payment loans c. bridge-loans d. closed-end leases The _____ ratio gives actual losses on loans, while the ______ ratio gives the extent to which the bank’s assets are devoted to loans. a. loss rate; capitalization b. loss rate; loan risk c. loan risk; loss rate d. operating efficiency; loan risk
es Little Kimi Clothiers can borrow from its bank at 20 percent to take a cash discount. The terms of the cash discount are 3/25 net 85. a. Compute the cost of not taking the cash discount. (Use 365 days in a year. Do not round the intermediate calculations. Round the final answer to 2 decimal places.) Cost of not taking a cash discount b. Should the firm borrow the funds? % 00 Yes O No
Dome Metals has credit sales of $450,000 yeariy with credit terms of net 45 days, which is also the average collection perlod. a. Assume the fnrm offers a 2 percent discount for payment in 18 days and every customer takes advantage of the discount. Also assume the firm uses the cash generated from its reduced receivables to reduce its bank loans which cost 12 percent. What will the net gain or loss be to the firm if this discount is offered? (Use a 360-day year.)
The Branson Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2.5 percent per period. Current Policy New Policy Price per unit $ 85 $ 87 Cost per unit $ 45 $ 45 Unit sales per month 4,250 ? What is the break-even quantity for the new credit policy? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Assignment: Transmission channels of monetary policy operations List all the results of Central bank buying T- bills on the open market for $1 000 000. Settings: Money multiplier is 5, the price of the T-bills increases by 10% (prompting: with the corresponding drop of revenue).
Dome Metals has credit sales of $162,000 yearly with credit terms of net 30 days, which is also the average collection period. a. Assume the firm offers a 2 percent discount for payment in 15 days and every customer takes advantage of the discount. Also assume the firm uses the cash generated from its reduced receivables to reduce its bank loans which cost 8 percent. What will the net gain or loss be to the firm if this discount is offered? (Use a 360-day year.) Loss of: $_________
A firm offers terms of 1.2/10, net 60. a. What effective annual interest rate does the firm earn when a customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What effective annual interest rate does the firm earn if the terms are changed to 2.2/10, net 60, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What effective annual interest rate does the firm earn if the terms are changed to 1.2/10, net 75, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) d. What effective annual interest rate does the firm earn if the terms are changed to 1.2/15, net 60, and the customer does not…
Compute the cost of not taking the following cash discounts. Note: Use a 360-day year. Do not round intermediate calculations. Input your final answers as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. Cost of Lost Discount 22.11% 18.71% 40.51% 157.41% a. 2/11, net 50 b. 2/17, net 50 c. 4/15, net 50 d. 4/19, net 155
Company A is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or taking out a loan. They owe the supplier $23345, and they can borrow the money from Bank A, which has offered to lend the firm $23345 for 2 month(s) at an APR (compounded) of 15%. The bank will require a (no-interest) compensating balance of 7% of the face value of the loan and will charge a $216 loan origination fee, which means Hand-to-Mouth must borrow even more than the $23345. Compute the EAR of the loan. Give typing answer with explanation and conclusion
on a a discount basis. Problem 7 COST OF TRADE CREDIT AND BANK LOAN Lamar Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 60, and it currently pays after 5 days and takes discounts. Lamar plans to expand. which will require additional financing. a) If Lamar decides to forgo discounts how much additional credit could it get and what would be the nominal and effective cost of that credit? P) J the company could get the funds from a bank at a rate of 10%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? (C) Should Lamar use bank debt or additional trade credit? Explain. Page 121 of 161
Q2. A company currently has annual sales of Rs. 500,000 and an average collection period of 30 days. It is considering a more liberal credit policy. If the credit period is extended, the company expects sales and bad-debt losses to increase in following manner: Credit policy А Increase in credit period Increase in sale (Rs) Bad debts % of total sales 25,000 1.2 35,000 1.5 40,000 1.8 50,000 ABCDE 10 days 15 30 42 2.2 The selling price per unit is Rs 2. Average cost per unit at the current level of operations is Rs. 1.50 and variable cost per unit is Rs. 1.20. if current bad debt loss is 1% and required rate of return on investment is 20%, which credit policy should be undertaken? Ignore taxes and assume 360 days in a year.

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