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Tricia Velasquez wishes to apply NPV analysis to a newly received order. The company’s credit terms are net 45 days. Its opportunity cost of funds is 12 percent. The order dollar amount is $30,000. She finds out from the cost accounting department that variable costs are approximately 65 percent of sales and that incremental credit administration and collection expenses approach 1 percent of sales. a. Assuming that the customer will pay according to the credit terms, with perfect certainty, should Tricia approve the order? b. .Assume that further research indicates that payment probabilities and timing for accounts similar to the credit applicant are as follows: PAYMENT TIMING/ PROBABILITY Within 45 days/0.50, 45-60 days/0.30, 60-90 days/ 0.15, Over 90 days/0.05 Assume that payments are received evenly within the above time brackets. The company’s experience is that payment received after 90 days is gotten only after referral to a collection agency. The agency charges 30 percent of the dollar amount of the invoice. It collects, on average, 65 percent of the invoice amount, about one month after referral. Before the agency referral at day 90, and after the 45 days, the company incurs an additional $125 collection cost every 15 days. Based on the expected NPV of the revised situation, should Tricia recommend credit extension?
Compute the price of a $5,000 par value bond with a coupon rate of 7.5% (semi-annual payments) and 19 years remaining to maturity. Assume that the current yield to maturity on the bond is 8.60%.Round all dollar answers to 2 decimal places
The purpose of this project is to give you real life experience on investment. In this project, you would first act as fund managers to construct, manage and advertise a fund of your own. statement of the investment goal and style of the fund brief d..
On average, your firm sells $25,800 of items on credit each day. The firm's average operating cycle is 35 days and it acquires and sells inventory, on average, every 18 days. What is the average accounts receivable balance? A firm sells 14,200 units ..
Explain the relationships among the static budget, flexible budget, and actual results. Assume that a group practice has both capitated and fee for service (FFS) patients. Furthermore, the number of capitated enrollees has changed over the budget per..
Within a given distribution channel, the following information is available concerning trade margins and costs. A wholesaler has a unit selling price of $250 and a unit cost of $140. The retailer requires a 33% mark up on selling price. The manufactu..
dear sir madam ltbrgt ltbrgtcan you please provide me the attached solution plagiarism free. looking forward to hear
How would you explain the concept of integrated risk management to the Executive Committee of your bank? If you were to implement integrated risk management at your bank, what criteria would you be looking for?
Appliance for Less is a local appliance store. It costs this store $18.85 per unit annually for storage, insurance, etc., to hold microwave in their inventory. Sales this year are anticipated to be 765 units. Each order costs $91. The company is usin..
A bank recently decided that 6.5% should be added to the risk free rate to compensate it for the risk it would be taking on in lending to Mt Langi. If the 2-year Australian government bond rate is currently 4%, what would be the coupon rate at which ..
Over the past five years, a stock produced returns of 14%, 22%, -16%, 2%, and 10%. What is the probability that an investor in this stock will NOT lose more than 8% nor earn more than 21% in any one given year?
At an output level of 61,000 units, you calculate that the degree of operating leverage is 2. The output rises to 66,000 units. What will the percentage change in operating cash flow be?
The Trektronics store begins each week with 200 phasers in stock. The stock is depleted each week and reordered. The carrying cost per phaser is $37 per year and the fixed order cost is $45. What is the current total carrying cost? What is the curren..
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