Extend credit to a group of new customers

Assignment Help Finance Basics
Reference no: EM132234956

Firm Z is evaluating a proposal to extend credit to a group of new customers. The new customers will generate an average of $90,000 per day in new sales. On average, they will pay in 30 days. The variable cost ratio (i.e., COGS) is 80% of sales, collection expenses are 5% of sales, and the discount rate is 8%. Assume that the variable cost occur upfront while collection cost occur on the date in which the customer's payment is received. What is the NPV of one day's sales if Firm C grants credit. Assume there is no bad debt loss.

Reference no: EM132234956

Questions Cloud

Define how principles of capital budgeting can be used : Using your knowledge of capital budgeting techniques, explain how principles of capital budgeting, such as the payback method, IRR, and NPV.
What is current stock price : The firm's required return (rs) is 16%. What is its current stock price (i.e. solve for Po)?
Firms operating globally develop organizational strategies : Large firms operating globally develop organizational strategies based on the type of industries and businesses in which they compete.
What is the stock current price : The required rate of return is rs = 12.5%, and the expected constant growth rate is g = 6.9%. What is the stock's current price?
Extend credit to a group of new customers : Firm Z is evaluating a proposal to extend credit to a group of new customers. The new customers will generate an average of $90,000 per day in new sales.
Develop research skills using the codification : Throughout the semester, you will research accounting topics (GAAP) using the Codification. This week you are tasked to review the Codification.
Cost of capital for the project : If the cost of capital for the project is 11 percent, I need the project's NPV and IRR. Please show work.
Distinguish the types of technology used in long-term care : Distinguish the types of technology used in long-term care—information systems, telehealth/telemedicine, and assistive technology ?
Opportunity cost of capital on the stock : The stock pays no dividends, so the entire return will be based on the price of the stock when sold. The opportunity cost of capital on the stock is 10 percent.

Reviews

Write a Review

Finance Basics Questions & Answers

  How many orders does the company place per year

Safety Stocks and Order Points. Saché, Inc., expects to sell 700 of its designer suits every week. The store is open seven days a week and expects to sell.

  Fighting to prosper in a highly competitive market

"Dr Pepper Snapple Group 2011: Fighting to Prosper in a Highly Competitive Market" Please respond to the following:

  What is mean and the standard deviation of the accumulation

What is the mean and the standard deviation of the ACCUMULATION? What is the probability that the ACCUMULATION is over $200,000? over $240,000?

  Determine whether a long or short hedge is appropriate

A firm plans to sell some foreign currency denominated assets and convert the proceeds to domestic currency.

  How much will the investment be worth at end of year four

You have just purchased an investment that generates the cash flows shown below for the next four years. You are able to reinvest these cash flows.

  Marginal ?cost-benefit analysis treats

You should authorize the? $100,000 expenditure to continue the project because the marginal ?cost-benefit analysis treats the? $2.5 million as part of the? proj

  What did frederick douglass do

What did Frederick Douglass do that was so important for black history? I just need to know basic outline of him and his life and how he contributed to black.

  The management of gawain

The management of Gawain plc is evaluating two projects whose returns depend on the future state of the economy as shown below:

  Analyze the evolution of the countrys monetary system

Analyze the evolution of the country's monetary system, including the impact of any fiscal monetary and trade policies and describe the major components of the monetary system, including organizations and financial institutions.

  Prepare the budgeted multiple-step income statement

Cook Farm Supply Company manufactures and sells a pesticide called Snare. The following data are available for preparing budgets for Snare for the first.

  Identify the three elements which make up the terms of sale

FIN/571- Identify the three elements which make up the terms of sale. What factors influence when credit should be granted and the length of the credit period offered to customers?

  Find the cash flows for the given project

What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)

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