CFIN -STUDENT EDITION-ACCESS >CUSTOM<
6th Edition
ISBN: 9780357752951
Author: BESLEY
Publisher: CENGAGE C
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Panda Co. is planning to change its collection policies that will change the collection period from 5 days to 10 days. The daily projected credit sales for the upcoming year of the company is P40,000. Prevailing rates are expected at 3%. To make the change in collection policy cost-beneficial, the minimum savings in collection cost for the coming year should be?
ABC is deciding to give a cash discount of 1% if the customers pay on the tenth day. It originally offers a credit term of n/30. Without the cash discount, credit sales would be P6750000 with an average age of inventory of 27 days. With the cash discount, credit sales are forecasted to increase by15%, collections within the discount period is 40% and the average age will be 22 days. The variable cost rate is 60% while the effective interest rate that ABC uses for forecasting is 8%. Using the 360-day year, how much is the net benefit or cost of the new policy?
CA Inc. assumes new customers will default 15 percent of the time but if they don't default, they will become repeat customers who always pay their bills. Assume the average sale is $500 with a variable cost of $350, and a monthly required return of 1.75 percent. What is the NPV of extending credit for one month to a new customer? Assume 30 days per month.
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- A company is considering extending credit to a new customer. If the customer is approved, credit would be extended for 1 month. The required return is 1.3% per month. The price per unit is $4,600 and the variable cost per unit is $3,40O. Assume customers who don't default become repeat customers and place the same order every month forever and that a repeat customer will never default. What is the break-even probability of default?arrow_forwardShow me the solution please, thank you! ABC is deciding to give a cash discount of 1% if the customers pay on the tenth day. It originally offers a credit term of n/30. Without the cash discount, credit sales would be P6,750,000 with an average age of 27 days. With the cash discount, credit sales are forecasted to increase by 15%, collections within the discount period is 40% and the average age will be 22 days. The variable cost rate is 60% while the effective interest rate that ABC uses for forecasting is 8%. Using a 360-day year, how much is the net benefit or (cost) of the new policy?arrow_forwardYou have just purchased new goods worth 10,000 EUR from your supplier. Your supplier offers you to pay within 45 days. If you pay within the first 10 days, you get a discount of 1.3%. You know that he might accept a delay of 2 days, but if you pay later than day 47, you will most likely get an additional fee of 550 EUR. You need your next delivery in 60 days and you know he will not deliver the new goods unless you pay the outstanding invoice. When would you pay? Why? What is the effective interest rate?arrow_forward
- Your firm spends $5,000 every month on printing and mailing costs, sending statements to customers. If the interest rate is 0.5% per month, what is the present value of eliminating this cost by sending the statements electronically?arrow_forwardRound House Furniture offers credit to its customers at a rate of 1.15 percent per month. What is the effective annual rate (EAR) on this credit offer? Can the calculator and excel solution be provided?arrow_forwardAn auto dealer has designed a marketing gimmick. They are asking their customers to pay only $119 at the end of each month, for the first two years for a car priced at $12,000. The APR on the vehicle is 5.04% and the total term of the loan is 5 years. What is the monthly payment for the remaining three years? Interest is payable during the entire five year period.arrow_forward
- In evaluating a proposal to extend credit , new customers will generate an average of $19000 per day in new sales. On average, he will pay in 30 days. The variable cost ratio (COGS) is 30% of sales, administration expenses are 4% of sales, and the discount rate interest in the MKT is 0.05. What is the NPV of one day's salesarrow_forwardYou have a credit card with an APR of 36%. The minimum payment is 10% of the balance. Suppose you have a balance of $800. You decide to stop charging and make only the minimum payment. The initial payment will be 10% of $800, or $80. Calculate the minimum payment for the next two months. (Be sure to take into account the finance charges.)arrow_forwardA store will give you a 2.25% discount on the cost of your purchase if you pay cash today. Otherwise, you will be billed the full price with payment due in 1 month. What is the implicit borrowing rate being paid by customers who choose to defer payment for the month?arrow_forward
- A store will give you a 3.75% discount on the cost of your purchase if you pay cash today. Otherwise, you will be billed the full price with payment due in 1 month. What is the implicit borrowing rate being paid by customers who chose to defer payment for the month?arrow_forwardA consumer loan requires monthly payments, in equal amounts, $700.00. The next payment is due in one month. Assume that the appropriate discount rate is 21% (APR). What is the effective annual rate? (show them in excel spreadsheet, write your own present value formulas, don't use Excel built-in functions.arrow_forwardA supplier will give Shark Unibase Company a discount of 2% if an invoice is paid 60 days before its due date. Suppose Shark wants to take advantage of this discount but needs to borrow the money. It plans to pay back the loan in 60 days. What is the highest annual simple interest rate at which Shark Unibase can borrow the money and still save by paying the invoice 60 days before its due date?arrow_forward
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