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Until recently, Augean Cleaning Products sold its products on terms of net 69, with an average collection peri attempt to induce customers to pay more promptly, it has changed its terms to 2/10, EOM, net 69. Assume current sales of $100, costs of $89, an interest rate of 10%, 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: Percent of Sales with Cash Discount 69 Average Collection Periods (Days) Cash Discount Net 39a 89 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. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. Assume that sales volume is unchanged and there are no defaults. Calculate the NPV per $100 of sales based on the revised terms. Note: Assume all sales occur in the middle of the month. Do not round intermediate calculations. Round your answer to 2 decimal places. a. Net present value b. Net present value

Until recently, Augean Cleaning Products sold its products on terms of net 69, with an average collection peri attempt to induce customers to pay more promptly, it has changed its terms to 2/10, EOM, net 69. Assume current sales of $100, costs of $89, an interest rate of 10%, 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: Percent of Sales with Cash Discount 69 Average Collection Periods (Days) Cash Discount Net 39a 89 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. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. Assume that sales volume is unchanged and there are no defaults. Calculate the NPV per $100 of sales based on the revised terms. Note: Assume all sales occur in the middle of the month. Do not round intermediate calculations. Round your answer to 2 decimal places. a. Net present value b. Net present value

Essentials Of Investments
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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S Until recently, Augean Cleaning Products sold its products on terms of net 69, with an average collection period of 84 days. In an attempt to induce customers to pay more promptly, it has changed its terms to 2/10, EOM, net 69. Assume current sales of $100, costs of $89, an interest rate of 10%, 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: Percent of Sales with Cash Discount 69 Average Collection Periods (Days) Cash Discount Net 39a 89 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. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. Assume that sales volume is unchanged and there are no defaults. Calculate the NPV per $100 of sales based on the revised terms. Note: Assume all sales occur in the middle of the month. Do round intermediate calculations. Round your answer to 2 decimal places. a. Net present value b. Net present value
Transcribed Image Text:S Until recently, Augean Cleaning Products sold its products on terms of net 69, with an average collection period of 84 days. In an attempt to induce customers to pay more promptly, it has changed its terms to 2/10, EOM, net 69. Assume current sales of $100, costs of $89, an interest rate of 10%, 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: Percent of Sales with Cash Discount 69 Average Collection Periods (Days) Cash Discount Net 39a 89 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. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. Assume that sales volume is unchanged and there are no defaults. Calculate the NPV per $100 of sales based on the revised terms. Note: Assume all sales occur in the middle of the month. Do round intermediate calculations. Round your answer to 2 decimal places. a. Net present value b. Net present value
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