Hildegarde Inc. is considering a change in its cash-only sales policy. The new terms of sale would be net one month. The requiredreturn is 0.95% per month.Price per unitLost per unitUnit sales per monthNPVCurrent PolicyS$639$4951,240New Policy$$Calculate the NPV of the decision to switch. (Do not round Intermediate calculations. Round the answer to 2 decimal places. Omit"$" sign In your response. Negative answer should be Indicated by a minus sign.)6.304951,310

A firm is contemplating upon change in its sales policy, from cash sales to 1 month credit sales.…

Answered: Hildegarde Inc. is considering a change…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 33P

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Poleski Manufacturing, which maintains the same level of inventory at the end of each year, provided the following information about expenses anticipated for next year: The selling price of Poleskis single product is 16. In recent years, profits have fallen and Poleskis management is now considering a number of alternatives. Poleski wants to have a net income next year of 250,000, but expects to sell only 120,000 units unless some changes are made. The president of Poleski has asked you to calculate the companys projected net income (assuming 120,000 units are sold) and the sales needed to achieve the companys net income objective for next year. Also, compute Poleskis contribution margin per unit, contribution margin ratio, and break-even point for next year. The worksheet CVP has been provided to assist you. Note that the data from the problem have already been entered into the Data Section of the worksheet.
When prices are rising (inflation), which costing method would produce the highest value for gross margin? Choose between first-in, first-out (FIFO); last-in, first-out (LIFO); and weighted average (AVG). Evansville Company had the following transactions for the month. Calculate the gross margin for each of the following cost allocation methods, assuming A62 sold just one unit of these goods for $10,000. Provide your calculations. A. first-in, first-out (FIFO) B. last-in, first-out (LIFO) C. weighted average (AVG)
Oberweis Dairy switched from delivery trucks with regular gasoline engines to ones with diesel engines. The diesel trucks cost $6,000 more than the ordinary gasoline trucks but costs $1,800 per year less to operate. Assume that Oberweis saves the operating costs at the end of each month. If Oberweis uses a discount rate of 1% per month, approximately how many months, at a minimum, must the diesel trucks remain in service for the switch to be sensible?
Deuce Sporting Goods manufactures a high-end model tennis racket. The company’s forecasted income statement for the year, before any special orders, is as follows: Fixed costs included in the forecasted income statement are $400,000 in manufacturing cost of goods sold and $200,000 in selling expenses. A new client placed a special order with Deuce, offering to buy 1,000 tennis rackets for $100.00 each. The company will incur no additional selling expenses if it accepts the special order. Assuming that Deuce has sufficient capacity to manufacture 1,000 more tennis rackets, by what amount would differential income increase (decrease) as a result of accepting the special order? (Hint: First compute the variable cost per unit relevant to this decision.)
Red Hawk, Incorporated, is considering a change in its cash-only sales policy. The new terms of sale would be net one month. The required return is .62 percent per month. Current Policy New Policy Price per unit $ 760 $ 760 Cost per unit $ 555 $ 555 Unit sales per month 820 870 Calculate the NPV of the decision to switch. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
RedRed Hawk, Incorporated, is considering a change in its cash-only sales policy. The new terms of sale would be net one month. The required return is .84 percent per month. Current PolicyNew PolicyPrice per unit$ 980$ 980Cost per unit$ 790$ 790Unit sales per month1,0401,120 Calculate the NPV of the decision to switch. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Red Hawk, Incorporated, is considering a change in its cash-only sales policy. The new terms of sale would be net one month. The required return is .96 percent per month. Current Policy New Policy Price per unit $ 1,100 $ 1,100 Cost per unit $ 910 $ 910 Unit sales per month 1,160 1,260 Calculate the NPV of the decision to switch. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Typing only. ..
Sanchez, Incorporated, is considering a change in its cash-only sales policy. The new terms of sale would be net one month. The required return is 1.7 percent per month. Current Policy New Policy Price per unit $ 700 $ 700 Cost per unit $ 420 $ 420 Unit sales per month 1,120 1,220 Based on the above information, determine the NPV of the new policy.
A company is considering switching from a cash only policy to a net 30 credit policy. The price per unit is $500 and the variable cost per unit is $350. The company currently sells 1,400 units per month. Under the proposed policy the company expects to sell 1,500 units per month. The monthly compounded APR is 18%. Calculate the NPV of this switch. Assume that there are 30 days in one month. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50) .
A company is considering switching from a cash only policy to a net 30 credit policy. The price per unit is $700 and the variable cost per unit is $600. The company currently sells 1,000 units per month. Under the proposed policy the company expects to sell 1,200 units per month. The quarterly compounded APR is 15%. If you were using NPV analysis to decide whether the company should switch to the net 30 (1-month) credit policy, what amount would you use for the present value of the incremental cash flows?

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