In evaluating a proposal to extend credit , new customers will generate an average of $11000 per day in new sales. On average, he will pay in 30 days. The variable cost ratio (COGS) is 25% of sales, administration expenses are 3% of sales, and the discount rate interest in the MKT is 0.06. What is the NPV of one day's sales
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- Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000Now assume that it is several years later. The brothers are concerned about the firm’s current credit terms of net 30, which means that contractors buying building products from the firm are not offered a discount and are supposed to pay the full amount in 30 days. Gross sales are now running $1,000,000 a year, and 80% (by dollar volume) of the firm’s paying customers generally pay the full amount on Day 30; the other 20% pay, on average, on Day 40. Of the firm’s gross sales, 2% ends up as bad-debt losses. The brothers are now considering a change in the firm’s credit policy. The change would entail: (1) changing the credit terms to 2/10, net 20, (2) employing stricter credit standards before granting credit, and (3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to pay the full amount after only 20 days. The brothers believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm—after all, the discount amounts to a price reduction. Of course, these customers would take the discount and hence would pay in only 10 days. The net expected result is for sales to increase to $1,100,000; for 60% of the paying customers to take the discount and pay on the 10th day; for 30% to pay the full amount on Day 20; for 10% to pay late on Day 30; and for bad-debt losses to fall from 2% to 1% of gross sales. The firm’s operating cost ratio will remain unchanged at 75%, and its cost of carrying receivables will remain unchanged at 12%. To begin the analysis, describe the four variables that make up a firm’s credit policy and explain how each of them affects sales and collections.Toshiba Company is considering offering a cash discount to speed up the collection of account receivable, currently the firm has an average collection period of 56 days, annual sales are 50,000 units, and the sales unit price is $40 with per unit variable cost is $30. A 2% discount estimates that 80% of its customers will take, if sales are expected to rise by 12%, and the average collection period increased to 60 days. The additional profit contribution from sales is
- Pedro Corp. currently has sales of P2,000,000, and its days sales outstanding is 2 week. The financial manager estimates that offering longer credit terms would increase the days sales outstanding to 3 weeks and increase the sales by 50%. However, bad debts losses, which were 1% on the old sales, would amount to 2% only on incremental sales. Variable cost is 70% of sales. Pedro Corp. has a 10% receivable financing cost. Use 360 days per year, What is the incremental increase in the balance of AR? What is the Change in carrying cost? Indicate if an increase or decrease? What would the annual incremental pre-tax profit be if Pedro Corp. extended its credit period?Pedro Corp. currently has sales of P2,000,000, and its days sales outstanding is 2 week. The financial manager estimates that offering longer credit terms would increase the days sales outstanding to 3 weeks and increase the sales by 50%. However, bad debts losses, which were 1% on the old sales, would amount to 2% only on incremental sales. Variable cost is 70% of sales. Pedro Corp. has a 10% receivable financing cost. Use 360 days per year. a. What is the incremental increase in the balance of AR? b. What is the Change in carrying cost? Indicate if an increase or decrease c. What would the annual incremental pre-tax profit be if Pedro Corp. extended its credit period?A manufacturer currently prices its product at 10 TL per unit. Last year, the manufacturer sold 60.000 units. The variable cost per unit is 6 TL. Total fixed costs are 120.000 TL. The manufacturer intends to increase sales by 5%. Current accounts receivable collection period is 30 days. If the manufacturer wants to relax its credit standards, the expectation is that bad debt expenses will increase from 1% of sales to 2% of sales. The opportunity cost of investing in accounts receivables is 15%. In order to benefit from relaxing its credit standards, what would be the expected maximum accounts receivable collection period? (Assume that existing customers are not expected to alter their payment habits. 1 year = 365 days) a) 82,38 days b) 63,33 days c) 105,82 days d) 63,73 dayse) other
- Maurice Corp. currently has sales of P2,000,000, and its days sales outstanding is 2 weeks. The financial manager estimates that offering longer credit terms would increase the days sales outstanding to 3 weeks and increase the sales by 50%. However, Bad Debts losses, which were 1% on the old sakes, would amount to 2% only on incremental sales. Variable Cost is 70% of sales. Maurice Corp. has a 10% receivable financing cost. Use 360 days per year. A. What is the Incremental Increase in the balance of AR? (Format: 11,111.11) B. What is the Change in carrying cost? Indicate if it is an Increase or Decrease. (Format: 1,111.11 I or 11,111.11 D) C. What would the Annual Incremental Pre-tax Profit be if Maurice Corp. extended its credit period? (Format: 111,111.11)a. what is the EOQ for a firm that sells 5,000 units when the cost of placing an order is $5 and the carrying cost are $3.50 per unit? b. how long will the EOQ last? how many orders are placed annually? c. as a result of lower interest rates, the finnancial manager determines the carrying cost are now $1.80 per unit. what are the new EOQ and annual number of objects?Edgar Corp. currently has sales P2,000,000, and its days sales outstanding is 2 weeks. The financial manager estimates that offering longer credit terms would increase the days sales outstanding to 3 weeks and increase the sales by 50%. However, Bad Debts losses, which were 1% on the old sales, would amount to 2% only on incremental sales. Variable Cost is 70% of sales. Pedro Corp. has a 10% receivable financing cost. Use 360 days per year. Explain each item. A. What is the Incremental Increase in the balance of AR? (Format: 11,111.11) B. What is the Change in carrying cost? Indicate if it is an Increase or Decrease. (Format: 1,111.11 I or 11,111.11 D) C. What would the Annual Incremental Pre-tax Profit be if Edgar Corp. extended its credit period? (Format: 111,111.11)
- X Ltd. has annual sales of 10,000 units at $300 per unit. The annual fixed costs amount to $300,000. The variable cost is $200 per unit. The current credit period is 1 month. The company is considering a proposal to increase the credit period. Fixed cost will increase by $60,000 on account of increase in sales beyond 25% of present level. The company plans a pre-tax return of 15% on investment in receivables. Requirements: 1. You are required to calculate the most paying credit policy for the company. 2. Breifly describe the process and provide the analysis of the results.RAF is currently makes all sales on credit and offers no cash discount. The firm is considering offering a 2% cash discount for payment within 15 days. The firm’s current average collection period is 60 days, sales are 40,000 units, selling price is $45 per unit, and variable cost per unit is $36. The firm expects that the change in credit terms will result in an increase in sales to 42,000 units, that 70% of the sales will take the discount, and that the average collection period will fall to 30 days. If the firm’s required rate of return on equal-risk investments is 25%, should the proposed discount be offered? (Note: Assume a 360-day year.)The marketing manager has proposed a commission of $8 per unit. In exchange, the staff would accept a decrease in their salaries of $27,000 per month(this is the company's savings for the entire sales staff). They predict the incentive would increase monthly sales by 100 units. What should be the overall effect on the company's monthly net operating income of this change?