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

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 10QTD

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