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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Zane Corporation has an inventory conversion period of 76 days, an average collection period of 35 days, and a payables deferral period of 20 days. Assume 365 days in year for your calculations. What is the length of the cash conversion cycle? Round your answer to two decimal places.days If Zane's annual sales are $2,030,230 and all sales are on credit, what is the investment in accounts receivable? Do not round intermediate calculations. Round your answer to the nearest cent.$ How many times per year does Zane turn over its inventory? Assume that the cost of goods sold is 75% of sales. Use sales in the numerator to calculate the turnover ratio. Do not round intermediate calculations. Round your answer to two decimal places.x
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.) $
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 $9,900. 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 6%, what is the new balance (in $)? (Round your answer to the nearest cent.)
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…
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 $9,900. On October 4 they made a payment of $1,800. On October 13 the business borrowed $2,700, 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.)
Atlanta Cement, Inc. buys on terms of 2/15, net 30. It does not take discounts, and it typically pays 65 days after the invoice date. Net purchases amount to $720,000 per year. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year? Please explain process and show calculations.
(Related to Checkpoint 18.2) (Evaluating trade credit discounts) If a firm buys on trade credit terms of 5/15, net 90 and decides to forgo the trade credit discount and pay on the net day, what is the annualized cost of forgoing the discount (assume a 365-day year)? The annualized cost of the trade credit terms of 5/15, net 90 is %. (Round to two decimal places.)
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 $1,800. On October 13 the business borrowed $2,100, 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.) $
cool security systems has $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 $1,200. On October 13 the business borrowed $2,500 , and on October 19 they borrowed $4,200. If the current prime rate is 6% , what is the new balance (in $)? (Round your answer to the nearest cent.)
Compsny X sells on a 1/15, net 90, basis. Company Y buys goods with an invoice of $3,000. Discount= $30 Number of days= 75 C.) What is the effective annual rate of interest if Y pays on the due date rather than day 15? (Use 365 days in a year. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
ngram Office Supplies, Inc., buys on terms of 2/15, net 50 days. It does not take discounts, and it typically pays on time, 50 days after the invoice date. Net purchases amount to $675,000 per year. On average, what is the dollar amount of costly trade credit (total credit – free credit) the firm receives during the year? (Assume a 365-day year, and note that purchases are net of discounts.) Do not round intermediate calculations. $56,959 $64,726 $78,318 $59,548 $53,723

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