Blueroot Inc. is considering a change in its financing policy. Currently, it uses maximum trade credit...
Blueroot Inc. is considering a change in its financing policy. Currently, it uses maximum trade credit by not taking discounts on its purchases. The standard industry credit terms offered by all its suppliers are 2/10 net 30 days, and the firm pays on time. The new CFO is considering borrowing from its bank, using short-term notes payable, and then taking discounts. The firm wants to determine the effect of this policy change on its net income. Its net purchases are $11,760 per day, using a 365-day year. The interest rate on the notes payable is 10%, and the tax rate is 40%. If the firm implements the plan, what is the expected change in net income?
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Blueroot Inc. is considering a change in its financing policy.
Currently, it uses maximum trade credit...
Suppose the credit terms offered to your firm by its suppliers are 2/10, net 30 days....
Suppose the credit terms offered to your firm by its suppliers are 2/10, net 30 days. Your firm is not taking discounts, but is paying after 22 days instead of Day 30. You point out that the nominal cost of not taking the discount and paying on Day 30 is approximately 37%. But since your firm is neither taking discounts nor paying on the due date, what is the effective annual percentage cost (not the nominal cost) of its costly...
Jungle, Inc., currently has an all-cash credit policy. It is considering making a change in the...
Jungle, Inc., currently has an all-cash credit policy. It is considering making a change in the credit policy by going to terms of net 30 days. Based on the following information, what is the break-even price per unit under the new credit policy? The required return is 91 percent per month. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) New Policy Price per unit Cost per unit Unit sales per month Current Policy...
21-9: Accruals and Accounts Payable (Trade Credit) Problem 21-16 Trade Credit The Thompson Corporation projects an...
21-9: Accruals and Accounts Payable (Trade Credit) Problem 21-16 Trade Credit The Thompson Corporation projects an increase in sales from $1 million to $3 million, but it needs an additional $300,000 of current assets to support this expansion. Thompson can finance the expansion by no longer taking discounts, thus increasing accounts payable. Thompson purchases under terms of 3/10, net 30, but it can delay payment for an additional 35 days - paying in 65 days and thus becoming 35 days...
Trade Credit The Thompson Corporation projects an increase in sales from $1 million to $3 million...
Trade Credit The Thompson Corporation projects an increase in sales from $1 million to $3 million, but it needs an additional $300,000 of current assets to support this expansion Thompson can finance the expansion by no longer taking discounts, thus increasing accounts payable. Thompson purchases under terms of 1/10, net 30, but it can delay payment for an additional 35 days paying in 65 days and thus becoming 35 days past due without a penalty because of its suppliers currently...
Early Payment discount decisions: Prairie Manufacturing has four possible suppliers, all of which offer different credit...
Early Payment discount decisions: Prairie Manufacturing has four possible suppliers, all of which offer different credit terms. Except for the differences in creditterms, their products and services are virtually identical. The credit terms offered by these suppliers are shown in the followingtable: SUPPLIER CREDIT TERM J 3/5 NET 30 EOM K 4/30 NET 100 EOM L 2/15 NET 60 EOM M 2/10 NET 120 EOM . (Assume a 365-day year.) A. Calculate the approximate cost of giving...
Early Payment discount decisions: Prairie Manufacturing has four possible suppliers, all of which offer different credit...
Early Payment discount decisions: Prairie Manufacturing has four possible suppliers, all of which offer different credit terms. Except for the differences in credit terms, their products and services are virtually identical. The credit terms offered by these suppliers are shown in the following table: SUPPLIER CREDIT TERM J 3/5 NET 30 EOM K 4/30 NET 100 EOM L 2/15 NET 60 EOM M 2/10 NET 120 EOM . (Assume a 365-day year.) A. Calculate the approximate cost...
Codiac Corp. currently has an all-cash credit policy. It is considering making a change in the...
Codiac Corp. currently has an all-cash credit policy. It is considering making a change in the credit policy by going to terms of net 30 days. The required return is 0.91 percent per month Price per unit Cost per unit Unit sales per month Current Policy $ 250 $ 182 1,770 New Policy $ 255 $ 187 1.820 Calculate the NPV of the decision to change credit policies (Negative answer should be indicated by a minus sign. Do not round...
Codiac Corp. currently has an all-cash credit policy. It is considering making a change in the...
Codiac Corp. currently has an all-cash credit policy. It is considering making a change in the credit policy by going to terms of net 30 days. The required return is 0.58 percent per month Price per unit Cost per unit Unit sales per month Current Policy $ 155 $ 125 1.200 New Policy $ 158 $ 128 1230 Calculate the NPV of the decision to change credit policies (Negative answer should be indicated by a minus sign. Do not round...
Happy Times currently has an all-cash credit policy. It is considering making a change in the...
Happy Times currently has an all-cash credit policy. It is considering making a change in the credit policy by going to terms of net 30 days. Based on the following information, what do you recommend? The required return is .3 percent per month. Current Policy New Policy Price per unit $ 380 $400 Cost per unit $ 260 $ 250 Unit sales per month 2550 2700
Inc. can buy its inventory from any of four suppliers all of which offer 4. Rocky...
Inc. can buy its inventory from any of four suppliers all of which offer 4. Rocky Inc. can buy its inventory essentially the same pricing and quality. Their credit terms, however, vary considerably as follows: A 2/10, net 30 B 3/5, net 20 C 1/20, net 45 D 3/5, net 90 A). Calculate the implied interest rate associated with each policy. Assume a 365-day year. B). If Rocky buys some material from each vendor, which discounts should it take and...
Jungle, Inc., currently has an all-cash credit policy. It is considering making a change in the credit policy by going to terms of net 30 days. Based on the following information, what is the break-even price per unit under the new credit policy? The required return is 91 percent per month. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) New Policy Price per unit Cost per unit Unit sales per month Current Policy...
21-9: Accruals and Accounts Payable (Trade Credit) Problem 21-16 Trade Credit The Thompson Corporation projects an increase in sales from $1 million to $3 million, but it needs an additional $300,000 of current assets to support this expansion. Thompson can finance the expansion by no longer taking discounts, thus increasing accounts payable. Thompson purchases under terms of 3/10, net 30, but it can delay payment for an additional 35 days - paying in 65 days and thus becoming 35 days...
Trade Credit The Thompson Corporation projects an increase in sales from $1 million to $3 million, but it needs an additional $300,000 of current assets to support this expansion Thompson can finance the expansion by no longer taking discounts, thus increasing accounts payable. Thompson purchases under terms of 1/10, net 30, but it can delay payment for an additional 35 days paying in 65 days and thus becoming 35 days past due without a penalty because of its suppliers currently...
Codiac Corp. currently has an all-cash credit policy. It is considering making a change in the credit policy by going to terms of net 30 days. The required return is 0.91 percent per month Price per unit Cost per unit Unit sales per month Current Policy $ 250 $ 182 1,770 New Policy $ 255 $ 187 1.820 Calculate the NPV of the decision to change credit policies (Negative answer should be indicated by a minus sign. Do not round...
Codiac Corp. currently has an all-cash credit policy. It is considering making a change in the credit policy by going to terms of net 30 days. The required return is 0.58 percent per month Price per unit Cost per unit Unit sales per month Current Policy $ 155 $ 125 1.200 New Policy $ 158 $ 128 1230 Calculate the NPV of the decision to change credit policies (Negative answer should be indicated by a minus sign. Do not round...
Inc. can buy its inventory from any of four suppliers all of which offer 4. Rocky Inc. can buy its inventory essentially the same pricing and quality. Their credit terms, however, vary considerably as follows: A 2/10, net 30 B 3/5, net 20 C 1/20, net 45 D 3/5, net 90 A). Calculate the implied interest rate associated with each policy. Assume a 365-day year. B). If Rocky buys some material from each vendor, which discounts should it take and...
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