son.2 Fitzgerald, Incorporated, currently has an all-cash credit policy. It is considering making achange in the credit policy by going to terms of net 30 days. The required return is 87percent per month.Price per unitCost per unitUnit sales per monthCurrentNewPolicyPolicy$ 230$235$170$1751,6501,700Calculate the NPV of the decision to change credit policies. (A negative answer shouldbe indicated by a minus sign. Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)NPV$344,827.59

Net present value refers to the method of capital budgeting used for evaluating the viability of the…

Answered: Fitzgerald, Incorporated, currently has…

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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The Berry Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2.5% per period. Price per unit Cost per unit Unit sales per month NPV Current Policy New Policy $ $ $ 38 3,280 Calculate the NPV of the decision to change credit policies. (Omit "$" sign In your response. Negative answer should be Indicated by a minus sign.) 38 3,398
The Branson Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 1.5 percent per period. Price per unit Cost per unit Unit sales per month Current Policy $59 $33 2,450 NPV New Policy $61 $33 2,575 Calculate the NPV of the decision to change credit policies. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
The Branson Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2 percent per period. Price per unit Cost per unit Current New Policy Policy $ 86 $ 88 $46 $46 Unit sales per month 4,400 ? What is the break-even quantity for the new credit policy? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. Break-even quantity 4,397.63x
The Branson Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2.5 percent per period. Price per unit Cost per unit Unit sales per month Current Policy $71 $37 3,050 New Policy $73 $37 ? What is the break-even quantity for the new credit policy? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. Break-even quantity 3,200.00
The Berry Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 1.6% per period. Based on the following information, what is the break-even price per unit that should be charged under the new credit policy? Assume that the sales figure under the new policy is 2,900 units and all other values remain the same. (Round the final answer to 2 decimal places. Omit $ sign in your response.) Price per unit Cost per unit Unit sales per month Current Palicy New Policy $ 67 S 35 2, 900 65 $ 35 2, 750 Break-even price
The Snedecker Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2 percent per period. Based on the following information, what is the break-even price per unit that should be charged under the new credit policy? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price per unit Cost per unit Unit sales per month Break-even price $ Current Policy $ 53 $31 2,150 New Policy ? $ 31 2,400
CJ Stores has current cash-only sales of 218 units per month at a price of $236.55 a unit. If it switches to a net 30 credit policy, the credit sales price will be $249 while the cash price will remain at $236.55. The switch is not expected to affect the sales quantity but a 3 percent default rate is expected. The monthly interest rate is 1.4 percent. What is the net present value of the proposed credit policy switch? a. 24,727 b. 27,965 c. 26,893 d. 29,481 e. 25,978
A Zack Firm is evaluating an Accounts Receivable Change that would increase Bad Debts from 2% to 4% of Sales. Sales are currently 50,000 units, the selling price is $20 per unit, and the Variable Cost per unit is $15. As a result of the proposed change, sales are forecast to increase to 60,000 units. A. What are Bad Debts in Dollars currently? (Format: 11,111) B. What are Bad Debts in Dollars under the Proposed Change? (Format: 11,111) C. Calculate the Cost of the Marginal Bad Debts to the firm. (Format: 11,111)
3. Answer the following questions based on the information below Current credit policy(n/a) Proposed credit policy (net 30) Price (RO) 15 17 Variable cost per unit (RO) 8. 12 Quantity 200,000 300,000 Monthly rate 1.25% a. What is the incremental cash flows from switching credit policies? b. What is the cost of switching? c. What is your recommendation? d. We assume that the variable cost and the price per unit remain stable as in the current policy, calculate and interpret the break-even sales increase. e. What is the break-even probability of default if we assume one time scale? Interpret.
Axis Wells and Excavation (AWE) currently generates $198,000 in annual credit sales. AWE sells on terms of net 50, and its accounts receivable balance averages $11,000. AWE is considering a new credit policy with terms of net 25. Under the new policy, sales will decrease to $189,000, and accounts receivable will average $12,600. Compute the days sales outstanding (DSO) under the existing policy and the proposed policy. Assume there are 360 days in a year. Round your answers to the nearest whole number. DSOExisting: days DSONew: days
ABC & Company is making sales of Rs.16,00,000 and it extends a credit of 90 days to its customers. However, in order to overcome the financial difficulties, it is considering to change the credit policy. The proposed terms of credit and expected sales are given here under: Policy Terms Sales 1 75 days Rs.15,00,000 II 60 days Rs. 14,50,000 III 45 days Rs 14,25,000 IV 30 days Rs 13,50,000 V 15 days Rs.13,00,000 The firm has variable cost of 80% and fixed cost of Rs.1,00,000. The cost of capital is 15%. Evaluate different policies and which policy should be adopted?
Your business currently only accepts cash-only transactions. You are considering making a change by going to terms of net 30 days. With the following information, should you change your credit policy? Required return per month is 1.05 percent. Current New Policy Policy $ 13,150 $ 10,500 $ 13,550 $ 10,500 Price per unit Cost per unit Unit sales per 2,750 3,000 month

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