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Microbiotics currently sells all of its frozen dinner’s cash on delivery but believes it can increase sales by offering supermarkets 1 month of free credit. The price per carton is $160, and the cost per carton is $95. The unit sales will increase from 1,110 cartons to 1,170 per month if credit is granted. Assume all customers pay their bills and take full advantage of any credit period offered. a. If the interest rate is 1% per month, what will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Change in total monthly profit $ b. If the interest rate is 1.5% per month, what will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Change in total monthly profit $ c. Assume the interest rate is 1.5% per month but the firm can offer the credit only as a special deal to new customers, while existing customers will continue to pay cash on delivery. What will be the change in the firm's total monthly profits on a present value basis under these conditions? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Change in total monthly profit $
Payback period Jordan Enterprises is considering a capital expenditure that requires an initial investment of $42,000 and returns after-tax cash inflows of $7,000 per year for 10 years. The firm has a maximum acceptable payback period of 8 years.
The Taylors have purchased a $220,000 house. They made an initial down payment of $10,000 and secured a mortgage with interest charged at the rate of 6%/year on the unpaid balance. Interest computations are made at the end of each month. If the loan ..
"Managers should not focus on the present stock value of the company. Instead, they should focus on the profitability of the company. Doing so will result in increasing the value of the stock. Please evaluate in 2 paragraphs.
Dinklage Corp. has 4 million shares of common stock outstanding. The current share price is $70, and the book value per share is $5. The company also has two bond issues outstanding. Suppose the most recent dividend was $4.20 and the dividend growth ..
Your firm is contemplating the purchase of a new $605,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $65,000 at the end of that time. You will save $235,000 before..
A newly issued 20-year maturity, zero-coupon bond is issued with a yield to maturity of 8.6% and face value $1,000. Find the imputed interest income in the first, second, and last year of the bond's life. (Do not round intermediate calculations. Roun..
Describe the anti-takeover strategy employed by Genzyme during the Sanofi acquisition. Discuss why each may have been employed. In your opinion, did the Genzyme strategy work?
Brickhouse is expected to pay annual dividends of $1.90 and $2.10 over the next two years, respectively. After that, the company expects to pay a constant dividend of $2.30 a share. What is the value of this stock at a required return of 16 percent?
An analyst has collected the following information about Franklin Electric: Projected EBIT for the next year is $300 million. Projected depreciation expense for the next year is $50 million. Projected capital expenditures for the next year is $100 mi..
Mars, Inc. is considering the purchase of a new machine which will reduce manufacturing costs by $5,000 annually. The company will depreciate the cost of the new machine using the straight line method over the project life and it expects to sell the ..
Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 715,000 shares of stock outstanding. Assume that EBIT is $1.6 million. Compute the EPS for both Pl..
Leasing is often referred to as off-balance sheet financing of the way that the transaction is treated and reported in financial statements. Which of the following statements best describes the characteristics of off-balance sheet financing?
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