Until recently, Augean Cleaning Products sold its products on terms of net 54, with an average collection period of 69 days. In an attempt to induce customers to pay more promptly, it has changed its terms to 1/10, EOM, net 54. Assume current sales of $100, costs of $74, an interest rate of 13%, and no defaults. Assume each month has 30 days and a year has 360 days. The initial effect of the changed terms is as follows: Average Collection Periods (Days) Percent of Sales with Cash Discount Cash Discount Net 54 24a 74 aSome customers deduct the cash discount even though they pay after the specified date. a. Calculate the NPV per $100 of sales based on the original terms. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Net present value
Until recently, Augean Cleaning Products sold its products on terms of net 54, with an average collection period of 69 days. In an attempt to induce customers to pay more promptly, it has changed its terms to 1/10, EOM, net 54. Assume current sales of $100, costs of $74, an interest rate of 13%, and no defaults. Assume each month has 30 days and a year has 360 days. The initial effect of the changed terms is as follows: Average Collection Periods (Days) Percent of Sales with Cash Discount Cash Discount Net 54 24a 74 aSome customers deduct the cash discount even though they pay after the specified date. a. Calculate the NPV per $100 of sales based on the original terms. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Net present value
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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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Transcribed Image Text:Until recently, Augean Cleaning Products sold its products on terms of net 54, with an average collection period of 69 days. In an
attempt to induce customers to pay more promptly, it has changed its terms to 1/10, EOM, net 54. Assume current sales of $100, costs
of $74, an interest rate of 13%, and no defaults. Assume each month has 30 days and a year has 360 days. The initial effect of the
changed terms is as follows:
Average Collection Periods
(Days)
Cash Discount
Percent of Sales with Cash Discount
Net
54
24a
74
asome customers deduct the cash discount even though they pay after the specified date.
a. Calculate the NPV per $100 of sales based on the original terms. (Do not round intermediate calculations. Round your answer to 2
decimal places.)
Net present value
b. Assume that sales volume is unchanged and there are no defaults. Calculate the NPV per $100 of sales based on the revised terms.
(Assume all sales occur in the middle of the month. Do not round intermediate calculations. Round your answer to 2 decimal
places.)
Net present value
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