What is the daily NPV (Z) of the following credit terms? Current Terms Variables (E) Terms (all sales are credit sales) Net 30 Sales Growth Rate (g) Annual Credit Sales S1,000,000 Daily Credit Sales (S) $2,739.73 Cash Discount Offered - % (d) Customers Taking Discount -% p) DSO-Discount Takers (DP) DSO - Non-Discount Takers (CP) 33 Variable Cost Ratio (VCR) 75% Collection/Credit Exp (EXP) at CP 1% Bad Debt Expense Ratio (b) 2%

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
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What is the daily NPV (Z) of the following credit terms?
Current Terms
(E)
Variables
Net 30
Terms (all sales are credit sales)
Sales Growth Rate (g)
Annual Credit Sales
S1,000,000
Daily Credit Sales (S)
$2,739.73
Cash Discount Offered - % (d)
Customers Taking Discount - 9% p)
DSO - Discount Takers (DP)
DSO - Non-Discount Takers (CP)
33
Variable Cost Ratio (VCR)
75%
Collection/Credit Exp (EXP) at CP
1%
Bad Debt Expense Ratio (b)
2%
Annual Cost of Capital
10%
SE(1-dg)PE(1-be) / (1 + ¡DPE)
+ SE(1-pE)(1-be) / (1 + ¡CPE)
- VCR (SE)
ZE =
- EXPE (SE) / (1 + ¿CPE)
Transcribed Image Text:What is the daily NPV (Z) of the following credit terms? Current Terms (E) Variables Net 30 Terms (all sales are credit sales) Sales Growth Rate (g) Annual Credit Sales S1,000,000 Daily Credit Sales (S) $2,739.73 Cash Discount Offered - % (d) Customers Taking Discount - 9% p) DSO - Discount Takers (DP) DSO - Non-Discount Takers (CP) 33 Variable Cost Ratio (VCR) 75% Collection/Credit Exp (EXP) at CP 1% Bad Debt Expense Ratio (b) 2% Annual Cost of Capital 10% SE(1-dg)PE(1-be) / (1 + ¡DPE) + SE(1-pE)(1-be) / (1 + ¡CPE) - VCR (SE) ZE = - EXPE (SE) / (1 + ¿CPE)
75%
Variable Cost Ratio (VCR)
1%
Collection/Credit Exp (EXP) at CP
2%
Bad Debt Expense Ratio (b)
10%
Annual Cost of Capital
SE(1-dE)PE(1-be) / (1+ ¿DPE)
+ SE(1-pE)(1-bE) / (1 + ¿CPE)
- VCR (SE)
ZE =
%3D
EXPE (SE) / (1 + ¿CPE)
$579
$597
$633
None of the above
Transcribed Image Text:75% Variable Cost Ratio (VCR) 1% Collection/Credit Exp (EXP) at CP 2% Bad Debt Expense Ratio (b) 10% Annual Cost of Capital SE(1-dE)PE(1-be) / (1+ ¿DPE) + SE(1-pE)(1-bE) / (1 + ¿CPE) - VCR (SE) ZE = %3D EXPE (SE) / (1 + ¿CPE) $579 $597 $633 None of the above
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