A firm offers terms of 2/15, net 30. Currently, two-thirds of all customers take advantage of the

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A firm offers terms of 2/15, net 30. Currently, two-thirds of all customers take advantage of the trade discount; the remainder pay bills at the due date.

a. What will be the firm's typical value for its trade receivables period? (See Section 20.2 for a review of the trade receivables period.)

b. What is the average investment in trade receivables if annual sales are $20 million?

c. What would likely happen to the firm's trade receivables period if it changed its terms to 3/15, net 30?

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Fundamentals of Corporate Finance

ISBN: 978-1259024962

6th Canadian edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim

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Question Posted: Nov 14, 2017 02:34 AM

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A firm offers terms of 2/15, net 30. Currently, two-thirds of all customers take advantage of the

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a Twothirds of customers will pay by 15 days The other 13 will pay by 30 days Therefore the ...View the full answer

Fundamentals of Corporate Finance

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