Calculate the average collection period

Assignment Help Finance Basics
Reference no: EM13291908

You work for a company that extends trade credit to customers. Currently your variable cost ratio is 65% and the annual rate of interest set by the company is 4% and the terms are a 30-day net. It costs you $0.07 on the dollar for administrative costs.

Your monthly credit extension is $400,000 and you know (based on previous calculations) that 30% of your customers pay within 30 days, 30% pay within the 60-day net period, 25% pay within a 90-day period and the last 15% pay in a 120-day period.

Calculate the average collection period. If the current industry standard collection period is 40 days, determine if an early payment credit is worth implementing. How great of a discount should you provide?

 

Reference no: EM13291908

Questions Cloud

Find the change incurrents as a result of changing voltage : Consider a diode with n=1 which biased at 2mA. Find the change incurrents as a result of changing the voltage by (a) -10mv (b) +5mv(c) +10mv , using small signal model and exponential model
What is the amount of the dividend income you received : You sold 400 shares of stock today for $38.20 a share. You bought those shares one year ago at a total cost of $15,000. Your percentage return on this investment was 5.70 percent. What is the amount of the dividend income you received on this inve..
Explain difference and relationship between faith-religion : Explain the difference and relationship between faith, religion, ab) What are the two important elements of theology (for both theology in the narrow and broad sense) How do Catholics and Protestants differ in their view of the Bible. Explain the maj..
Find the magnitudes of the astronauts angular velocity : An astronaut is being tested in a centrifuge. The centrifuge has a radius of 9.6 m and, in starting, rotates according to ? = 0.34t^2, find the magnitudes of the astronaut's angular velocity
Calculate the average collection period : Calculate the average collection period. If the current industry standard collection period is 40 days, determine if an early payment credit is worth implementing. How great of a discount should you provide?
Explain what is value of the activation energy : What is value of the activation energy, Ea, for this reaction. What is the value of the pre-exponential factor (sometimes called the frequency factor), A, for this reaction
Which assets appears riskiest based on standard deviations : From the information below, compute the average annual return, the variance, standard deviation, and coefficient for each asset.
Plot the magnitude and phase of transfer function : plot the magnitude and phase (bode plots) of the following transfer function in the frequency range of 0.1 to1000rd/sec. Fs=(s+10)(s+50)/200s2
Find the total charge on the shell : A nonconducting spherical shell of inner radius R1 and outer radius R2 has a uniform volume charge density ?. find the total charge on the shell

Reviews

Write a Review

Finance Basics Questions & Answers

  Calculate the value of the option

The opportunity to invest in a project can be thought of as a 3 year real option that is worth $450 million with an exercise price of $700 million.

  Computation of net income and annual rate of return and npv

Computation of net income and annual rate of return and NPV and Continuing the previous problem and Apricot Company had sales

  What are the required rates of return on the four stocks

At the time these betas were developed, reasonable estimates for the risk-free rate, RF, and the required rate of return on the market, R(Rm), were 6.5 percent and 13.5 percent, respectively.

  How sensitive is the npv to changes in the quantity sold

The necessary equipment can be purchased for $32.5 million and will be depre- ciated on a seven-year MACRS schedule. It is be- lieved the value of the equipment in five years will be $3.5 million.

  Use to evaluate the equipment purchase

Divedends are expected to grow at a rate of 5.2% per year into the indefinite future. If the firm tax rate is 30% what discount rate should you use to evaluate the equipment purchase

  What is fielding projected loss for april

Fielding has no short-term as of March 1st 2008. Assume that the interest rate on short term borrowing is 1% per month. What is fielding's projected loss for april?

  What is belyk net income

In addition, the company had an interest expense of $215,300 and a tax rate of 30 percent. (Ignore any tax loss carryback or carryforward provisions.) What is Belyk's net income?What is Belyk's operating cash flow?

  Compare and contrast the uses of break-even analysis

Compare and contrast the uses of break-even analysis and sensitivity analysis in evaluating project risk.

  What is the maximum you should pay for this stock

After this initial period of super growth, the rate of increase in the dividend should decline to 8 percent. If you want to earn 12 percent on investments in common stock, what is the maximum you should pay for this stock?

  Which of the following is the most likely explanation

Firms A and B have identical gross profit margins but B has a smaller operating profit margin. Which of the following is the most likely explanation?

  Computation of the current price of the bond

Computation of the current price of the bond and What is the value of the same bond if the interest is paid semi-annually

  What do you expect the price of these bonds

Bond X is a premium bond making annual payments. The bond pays an 8 percent coupon, has a YTM of 6 percent, and has 13 years to maturity. Bond Y is a discount bond making annual payments.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd