Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 30, Problem 5PS
a)
Summary Introduction
To discuss: At the what time the product C grant or refuse the credit.
b)
Summary Introduction
To discuss: The time in which product C commences such a check.
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A credit card company is studying its late fee policy. The company has two types of customers: revolvers and transactors. It has 30% revolvers and 70% transactors. The
21.
balance carried by each type of customer is shown below:
Balance, $
2000
4000 6000
Revolver
probability
0.2
0.3
0.5
Transactor
probability
0.5
0.4
0.1
When late fees are assessed, customers call and request a reversal. The policy is to allow revolvers to get a refund of the fees, and to deny refunds to transactors. When denied refunds, 30% of
accounts close their accounts within a year, while 20% of the others whose fees were returned also close their accounts (perhaps they are still unhappy). If you start with 20 accounts (all of
whom are assessed late fees), simulate the total balance at the end of the year.
McEwan Industries sells on terms of 3/10, net 40. Total sales for the year are $1,912,500; 40% of the customers pay on the 10th day and
take discounts, while the other 60% pay, on average, 66 days after their purchases. Assume 365 days in year for your calculations. The data
has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions
below.
a. What is the days sales outstanding? Round your answer to two decimal places.
43.6
$
b. What is the average amount of receivables? Round your answer to the nearest cent. Do not round intermediate calculations.
days
228,452
c. What is the percentage cost of trade credit to customers who take the discount? Round your answers to two decimal places.
3.09 %
2.-When deciding to accept a cash discount from a supplier, on what day is it advisable to take the financing?
A) On the last day of the discount period, to see if they are able to meet the discount.
B) On the first day of the discount period, so why wait?
C) On any day of the discount period
D) In the middle of the discount period, so there is no risk.
Chapter 30 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 30 - Inventory What are the trade-offs involved in the...Ch. 30 - Prob. 2PSCh. 30 - Prob. 3PSCh. 30 - Prob. 4PSCh. 30 - Prob. 5PSCh. 30 - Prob. 6PSCh. 30 - Prob. 7PSCh. 30 - Credit policy How should your willingness to grant...Ch. 30 - Cash management Complete the passage that follows...Ch. 30 - Prob. 10PS
Ch. 30 - Prob. 11PSCh. 30 - Prob. 12PSCh. 30 - Prob. 13PSCh. 30 - Prob. 14PSCh. 30 - Credit terms Phoenix Lambert currently sells its...Ch. 30 - Prob. 16PSCh. 30 - Prob. 17PSCh. 30 - Prob. 18PSCh. 30 - Prob. 19PSCh. 30 - Prob. 20PSCh. 30 - Prob. 21PSCh. 30 - Prob. 22PSCh. 30 - Prob. 23PSCh. 30 - Prob. 24PSCh. 30 - Prob. 25PSCh. 30 - Money-market yields In Section 30-4 we described a...Ch. 30 - Money-market yields Look again at the previous...Ch. 30 - Prob. 29PSCh. 30 - Prob. 30PSCh. 30 - Prob. 31PSCh. 30 - Prob. 33PS
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