The Milton Company currently purchases an average of $23,000 per day in raw materials on credit terms of "net 25." The company expects sales to increase substantially next year and anticipates that its raw material purchases will increase to an average of $26,000 per day. Milton feels that it may need to finance part of this sales expansion by stretching accounts payable. Round your answers to the nearest dollar. a. Assuming that Milton currently waits until the end of the credit period to pay its raw material suppliers, what is its current level of trade credit? $ 575,000 b. If Milton stretches its accounts payable an extra 5 days beyond the due date next year, how much additional short- term funds (that is, trade credit) will be generated? $

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This scenario relates to three requirements. Nesud Co has credit sales of $45 million per year and on average settles accounts with trade payables after 60 days. One of its suppliers has offered the company an early settlement discount of 0.5% for payment within 30 days. Administration costs will be increased by $500 per year if the early settlement discount is taken. Nesud Co buys components worth $1.5 million per year from this supplier. From a different supplier, Nesud Co purchases $2.4 million per year of Component K at a price of $5 per component. Consumption of Component K can be assumed to be at a constant rate throughout the year. The company orders components at the start of each month in order to meet demand and the cost of placing each order is $248.44. The holding cost for Component K is $1.06 per unit per year. The finance director of Nesud Co is concerned that approximately 1% of credit sales turn into irrecoverable debts. In addition, she has been advised that customers…

Hurkin Manufacturing Company pays accounts payable on the tenth day after purchase. The average collection period is 30 days, and the average age of inventory is 40 days. The firm currently has annual sales of about $18 million and purchases of $14 million. The firm is considering a plan that would stretch its accounts payable by 20 days. If the firm pays 12% per year for its resource investment, what annual savings can it realize by this plan? Assume a 360- day year.

Pasti Berhad values, advertises and sells residential property on behalf of its customers. The companyhas been in business for only a short time and is preparing a cash budget for the first four months ofyear 2020. Expected sales of residential properties are as follows.Year 2019 2020 2020 2020 2020Month December January February March AprilUnits sold 10 10 15 25 30The average price of each property is RM180,000 and Pasti Berhad charges a fee of 3% of the valueof each property sold. Pasti Berhad receives 1% in the month of sale and the remaining 2% in themonth after sale. The company has ten employees who are paid monthly. The average salary peremployee is RM36,000 per year. If more than 20 properties are sold in each month, each employeewill be paid in that month a bonus of RM1,500 for each additional property sold.Variable expenses are incurred at the rate of 50% of the value of each property sold and theseexpenses are paid in the month of sale. Fixed overheads of RM44,300 per month…

Wemham-Miffin is considering launching a new line of septagonal-shaped paper. You have the following information: • Revenues due to the sale of the new product are expected to be $95 million annually. Of this, 77% will be by cash with the remainder sold on credit. Credit sales are expected to start being repaid after 2 years. • Total paper production costs will increase from the current level of $20 million annually to $51 million annually after the product launch. • Hyper-aggressive sales agent Dwight Schrute will be reassigned from other projects to sell the new product line. Customers of those other products will be relieved and sales will increase by $18 million annually. • The project will make use of an existing paper mill, built last year at a cost of $43 million. The mill is being depreciated using prime cost over a useful life of twenty-seven years. • However, due to this decision, machinery in the mill will need to be retrofit at a cost of $27 million at t=0. The retrofit…

Assume you are thinking about starting a business and would like to forecast your cash needs for the next six months. You expect sales to be approximately $30,000 per month for the first 12 months and your purchases to support sales will be approximately 60% of sales. You anticipate about 20% of your sales will be cash and 80% collected the following month. Your supplier has agreed to extend credit for 70 days at no cost (i.e. you will pay your bills on a two month lag). Your monthly expenses for rent, wages, utilities, and so forth will be approximately $3,500 per month. You have deposited $15,000 in a checking account to begin your operations and would like to maintain a minimum balance of $5,000 in that account. 1. Explain the purpose of creating budgets and how your budget will help the business remain capitalized 2 . Will you need additional funds at some point? Justify your answer. 3. How would you raise capital in the future?

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ABC would like to hire two loan collectors to speed up its collection process. Each of the loan collectors will be given total annual benefits of P150000 per year. The entity earns P30000000 in sales, 10% of which are cash. The entity has a 365-day per year and a minimum required rate of return of 10%. the current average age of receivables is 70 days but with the loan collectors, it is forecasted to decrease to 30 days. How much is the net benefit or cost of this option?