Marginal investment in accounts receivable

Assignment Help Finance Basics
Reference no: EM131360485

Parker Tool is considering lengthening its credit period from 30 to 60 days. All customers will continue to pay on the net date. The firm currently bills $470,000for sales and has $325,000 in variable costs. The change in credit terms is expected to increase sales to $500,000. Bad-debt expenses will increase from 1% to 1.5% of sales. The firm has a required rate of return on equal-risk investments of 20%. (Note: Assume a 365-day year.)

a. What additional profit contribution from sales will be realized from the proposed change?

b. What is the cost of the marginal investment in accounts receivable?

c. What is the cost of the marginal bad debts?

d. Do you recommend this change in credit terms?

Reference no: EM131360485

Questions Cloud

Determine the minimum required pcm bandwidth : A standard assumption for the the frequency band of an audio signal is in the frequency range 300 Hz to 3.2 kHz. A PCM signal is generated with a sampling rate of 8000 samples per second with signal-to-quantizing ratio of 44 dB.
Determine which is more strongly related to performance : BUS 322- Compare the difference between job satisfaction and organizational commitment. Determine which is more strongly related to performance for your selected company.
Calculate the reactions at points a and b for beams shown : Refer to the indicated problem and draw complete shear and bending moment diagrams. Show ordinates at key points and indicate magnitude of shear and moment. Neglect the beam weight.
Estimate the bandwidth of the modulated signal : Assuming the modulation is PM, determine the message signal m(t). Estimate the bandwidth of the modulated signal.
Marginal investment in accounts receivable : a. What additional profit contribution from sales will be realized from the proposed change? b. What is the cost of the marginal investment in accounts receivable?
Debt reduction and investment earnings potential : Consider your debt reduction and investment earnings potential, as well as any applicable taxes. Assume that tax rates are stable over the next 10 years, and inflation is low (
Show ordinates at key points and indicate magnitude of shear : Refer to the indicated problem and draw complete shear and bending moment diagrams. Show ordinates at key points and indicate magnitude of shear and moment. Neglect the beam weight.
Chase manhattan bank case study : The workload in many areas of bank operations has the characteristics of a no uniform distribution with respect to time of day. For example, at Chase Manhattan Bank in New York, the number of domestic money transfer requests received from customer..
What is the acceleration of the object : An object of mass m aquires a velocity as given in Figure 1.61.

Reviews

Write a Review

Finance Basics Questions & Answers

  The current spot price of platinum is 1500 in us dollars

the current spot price of platinum is 1500 in us dollars per troy ounce. assume a continuously compounded risk-free

  Corporate finance

Corporate finance Explain one way a firm can report current cash flow different from the true (un-managed or un-played with) amount. That method must not be an illegal act.

  Which swap candidate would be the best choice

Do you see any reason why Marlene should switch from her present bond holding into one of the other issues? If so, which swap candidate would be the best choice? Why?

  Problem about revenue recognition

Our sources of revenues include: (1) software, which includes new software license revenues earned from granting licenses to use our software products and fees from cloud software subscription offerings, and software license updates and product su..

  Ace trucking co inc is chartered in michigan it has 100

1. to qualify as an s corporation there is no limit to the number of shareholders.2. a corporation with more than 50

  What did the article mean by banks having a problem

What did the article mean by banks having a problem with "bad assets"?- Why is "ample lending" by banks necessary to "restart the wheels of commerce"?

  What change has benefited the consumer most

What change has benefited the consumer most? What new risks are banks subjected to given the greater use of technology within the industry? Utilize information provided in the readings and from your own experiences in your response.

  Discount future cash flows

How long will Austin have to use the system to justify the additional expense over the conventional model and discount future cash flows before calculating payback and round to a whole year.

  Assay expenses at the time of sale are expected to total

over the past 10 years your 15000 in gold coins has increased in value by 200 percent. you plan to sell these coins

  Abe forrester and three of his friends from college have

abe forrester and three of his friends from college have interested a group of venture capitalists in backing their

  Guidance of non-installment

A check for Rs. 300 got from Mr. Dass Gupta and stored in the bank was shamed however guidance of non-installment was not got from the bank upto 31st March.

  Analyze the effectiveness of three individuals

Analyze the effectiveness of these three individuals. How profitable are the firms they head in relation to others in the industry?

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