Considering relaxing its credit standards to encourage sales
Course:- Financial Management
Reference No.:- EM13942953

Assignment Help
Assignment Help >> Financial Management

Pueblo Corp. is considering relaxing its credit standards to encourage more sales. As a result, sales are expected to increase 15% from the current level of 300 units per year. The average collection period is expected to increase to 35 days from 25 days and bad debts are expected to double the current 1% level. The sale price per unit is $850, the variable cost per unit is $650 and the average cost per unit at the 300 unit level is $700. The firm's required return on investment is 20%. What is the cost of marginal investments in accounts receivable under the proposed plan? (Assume 365-day year)

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
Tapley Inc. currently has total capital equal to $9 million, has zero debt, is in the 40% federal-plus-state tax bracket, has a net income of $3 million, and pays out 40% of i
Bradford Manufacturing Company has a beta of 1.9, while Farley Industries has a beta of 0.75. The required return on an index fund that holds the entire stock market is 8.5%.
An investment project costs $10,000 and has annual cash flows of $2,840 for six years. What is the discounted payback period if the discount rate is zero percent? What is the
Suppose that the current one-year rate (one-year spot rate) and expected one-year Tbill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as fol
Bruer, Inc., is expected to maintain a constant 6.05 percent growth rate in its dividends, indefinitely. If the company has a dividend yield of 4.55 percent, what is the requi
Suppose we observe the following rates; The one year rate is 2.95%. The two-year rate is 3.36%. If the unbiased expectations theory holds, what is the one-year interest rate (
You are evaluating a growing perpetuity product from a large financial services firm. The product promises an initial payment of $23,000 at the end of this year and subsequent
A stock will not pay a dividend for 3 years and then will pay a $5 dividend (D4) that will grow constantly at 5%. If the required rate of return for this stock is 10%, what is