A company engaged high-end apparel sells for cash only. The marketing manager is contemplating of offering credit sales allowing 90 days to pay. Buyers understood the time value of money, so they would all wait and pay on the 90th day. As a result, the company has to carry big balances of receivable and the company would need to borrow funds from a bank at a nominal rate of 12% compounding daily based on approximate 360 days a year. The company wants to increase the base prices of its products by exactly enough to offset the bank’s interest charges. To the closest percentage point, by how much should the company raise the product’s prices
A company engaged high-end apparel sells for cash only. The marketing manager is contemplating of offering credit sales allowing 90 days to pay. Buyers understood the time value of money, so they would all wait and pay on the 90th day. As a result, the company has to carry big balances of receivable and the company would need to borrow funds from a bank at a nominal rate of 12% compounding daily based on approximate 360 days a year. The company wants to increase the base prices of its products by exactly enough to offset the bank’s interest charges. To the closest percentage point, by how much should the company raise the product’s prices
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 32P
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A company engaged high-end apparel sells for cash only. The marketing manager is contemplating of offering credit sales allowing 90 days to pay. Buyers understood the
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