A firm is contemplating shortening its credit period from 40 to 30 days and believes that,...
A firm is contemplating shortening its credit period from 40 to 30 days and believes that, as result of this change, its average collection period will decline from 45 to 36 days. Bad-debt expenses are expected to decrease from 1.5% to 1% of sales. The firm is currently selling 12,000 units but believes that as result of the proposed change, sales will decline to 10,000 units. The sale price per unit is $56, and the variable cost per unit is $45 . The firm has a required return on equal-risk investments of 25%. Evaluate this decision, and make a recommendation to the firm. (assume a 365-day year).
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A firm is contemplating shortening its credit period from 40 to
30 days and believes that,...
Shortening the credit period A firm is contemplating shortening its credit period from 40 to 30...
Shortening the credit period A firm is contemplating shortening its credit period from 40 to 30 days and believes that, as a result of this change, its average collection period will decline from 45 to 36 days. Bad-debt expenses are expected to decrease from 1.5% to 1.0% of sales. The firm is currently selling 12,000 units but believes that as a result of the proposed change, sales will decline to 10,000 units. The sale price per unit is $56, and...
Shortening the credit period A firm is contemplating shortening its credit period from 30 to 20...
Shortening the credit period A firm is contemplating shortening its credit period from 30 to 20 days and believes that, as a result of this change, its average collection period will decline from 34 to 25 days. Bad-debt expenses are expected to decrease from 1.7% to 1.1% of sales. The firm is currently selling 12,400 units but believes that as a result of the proposed change, sales will decline to 10,300 units. The sale price per unit is S54, and...
Shortening the credit period A firm is contemplating shortening its credit period from 30 to 20...
Shortening the credit period A firm is contemplating shortening its credit period from 30 to 20 days and believes that, as a result of this change, its average collection period will decline from 34 to 27 days. Bad-debt expenses are expected to decrease from 1.5 % to 0.9 % of sales. The firm is currently selling 11,700 units but believes that as a result of the proposed change, sales will decline to 9,600 units. The sale price per unit is...
Shortening the credit period A firm is contemplating shortening its credit period from 45 to 35...
Shortening the credit period A firm is contemplating shortening its credit period from 45 to 35 days and believes that, as a result of this change, its average collection period will decline from 52 to 41 days. Bad-debt expenses are expected to decrease from 1.4% to 1.1% of sales. The firm is currently selling 11,600 units but believes that as a result of the proposed change, sales will decline to 9,700 units. The sale price per unit is $54, and...
Relaxation of credit standards Lewis Enterprises is considering relaxing its credit standards to increase its currently...
Relaxation of credit standards Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 10% from 15,000 to 16,500 units during the coming year, the average collection period is expected to increase from 50 to 70 days; and bad debts are expected to increase from 2.5% to 4.5% of sales. The sale price per unit is $35, and the variable cost per unit...
Relaxation of credit standards Lewis Enterprises is considering relaxing its credit standards to increase its currently...
Relaxation of credit standards Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 20% from 10,000 to 12,000 units during the coming year, the average collection period is expected to increase from 35 to 55 days, and bad debts are expected to increase from 1.5% to 3.5% of sales. The sale price per unit is $44, and the variable cost per unit...
Solarius Trading Company is considering lengthening its credit period from 30 to 50 days. All customers...
Solarius Trading Company is considering lengthening its credit period from 30 to 50 days. All customers will continue to pay on the net date. The firm currently has $300,000 of sales per year, but believes that as a result of the proposed change, sales will increase to $360,000. Bad debt expense will increase from 3% to 5% of sales. The variable cost is 70% of sales. The firm has a cost of capital of 12%. Assume a 360-day year. What...
Forrester Fashions has annual credit sales of 250,000 units with an average collection period of 70...
Forrester Fashions has annual credit sales of 250,000 units with an average collection period of 70 days. The company has a per-unit variable cost of $20 and a per-unit sale price of $30.00. Bad debts currently are 5% of sales. The firm estimates that a proposed relaxation of credit standards would not affect its 70-day average collection period but would increase bad debts to 7.50% of sales. which would increase to 300,000 units per year. Forrester requires a 12% return...
Relaxation of cred it standards Lewis Enterprises is considering relaxing its credit standards to increase its...
Relaxation of cred it standards Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 20 % from 11,000 to 13,200 units during the coming year; the average collection period is expected to increase from 40 to 55 days; and bad debts are expected to increase from 1.5% to 3 % of sales. The sale price per unit is $44, and the variable...
Forrester Fashions has annual credit sales of 250,000 units with an average collection period of 70 days. The company h...
Forrester Fashions has annual credit sales of 250,000 units with an average collection period of 70 days. The company has a per-unit variable cost of $20 and a per-unit sale price of $30. Bad debts currently are 5% of sales. The firm estimates that a proposed relaxation of credit standards would not affect its 70-day average collection period but would increase bad debts to 7.5% of sales, which would increase to 300,000 units per year. Forrester requires a 12% return...
Shortening the credit period A firm is contemplating shortening its credit period from 40 to 30 days and believes that, as a result of this change, its average collection period will decline from 45 to 36 days. Bad-debt expenses are expected to decrease from 1.5% to 1.0% of sales. The firm is currently selling 12,000 units but believes that as a result of the proposed change, sales will decline to 10,000 units. The sale price per unit is $56, and...
Shortening the credit period A firm is contemplating shortening its credit period from 30 to 20 days and believes that, as a result of this change, its average collection period will decline from 34 to 25 days. Bad-debt expenses are expected to decrease from 1.7% to 1.1% of sales. The firm is currently selling 12,400 units but believes that as a result of the proposed change, sales will decline to 10,300 units. The sale price per unit is S54, and...
Shortening the credit period A firm is contemplating shortening its credit period from 30 to 20 days and believes that, as a result of this change, its average collection period will decline from 34 to 27 days. Bad-debt expenses are expected to decrease from 1.5 % to 0.9 % of sales. The firm is currently selling 11,700 units but believes that as a result of the proposed change, sales will decline to 9,600 units. The sale price per unit is...
Shortening the credit period A firm is contemplating shortening its credit period from 45 to 35 days and believes that, as a result of this change, its average collection period will decline from 52 to 41 days. Bad-debt expenses are expected to decrease from 1.4% to 1.1% of sales. The firm is currently selling 11,600 units but believes that as a result of the proposed change, sales will decline to 9,700 units. The sale price per unit is $54, and...
Relaxation of credit standards Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 10% from 15,000 to 16,500 units during the coming year, the average collection period is expected to increase from 50 to 70 days; and bad debts are expected to increase from 2.5% to 4.5% of sales. The sale price per unit is $35, and the variable cost per unit...
Relaxation of credit standards Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 20% from 10,000 to 12,000 units during the coming year, the average collection period is expected to increase from 35 to 55 days, and bad debts are expected to increase from 1.5% to 3.5% of sales. The sale price per unit is $44, and the variable cost per unit...
Forrester Fashions has annual credit sales of 250,000 units with an average collection period of 70 days. The company has a per-unit variable cost of $20 and a per-unit sale price of $30.00. Bad debts currently are 5% of sales. The firm estimates that a proposed relaxation of credit standards would not affect its 70-day average collection period but would increase bad debts to 7.50% of sales. which would increase to 300,000 units per year. Forrester requires a 12% return...
Relaxation of cred it standards Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 20 % from 11,000 to 13,200 units during the coming year; the average collection period is expected to increase from 40 to 55 days; and bad debts are expected to increase from 1.5% to 3 % of sales. The sale price per unit is $44, and the variable...
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