Calspect Corporation has annual sales of $37.0 million and all of its sales are credit sales,...

 

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Calspect Corporation has annual sales of $37.0 million and all of its sales are credit sales, that is, all sales are made to customers who pay after receipt of an invoice following shipment. Calspect's terms are "net 30 days" and payments are made, on average, 16 days late. A. What are Calspect's A/R Days (DSO)? What is the average dollar investment in A/R B. Calspect is seeking to accelerate its DSO by offering a discount for early payment. It offers to accept a 98.5% payment, 1.5% discount) if the invoice is paid in 10 days from shipment. Following the offer, 30% of the customers pay in 10 days and take the discount; while the other 70% pay as before. a. What is the new average investment in A/R? b. What is the new DS C. How much annual profit is Calspect foregoing? d. If Calspect finances its A/R with 100% debt, and the interest rate is 8.3%, does offering the discount make financial sense? Calspect Corporation has annual sales of $37.0 million and all of its sales are credit sales, that is, all sales are made to customers who pay after receipt of an invoice following shipment. Calspect's terms are "net 30 days" and payments are made, on average, 16 days late. A. What are Calspect's A/R Days (DSO)? What is the average dollar investment in A/R B. Calspect is seeking to accelerate its DSO by offering a discount for early payment. It offers to accept a 98.5% payment, 1.5% discount) if the invoice is paid in 10 days from shipment. Following the offer, 30% of the customers pay in 10 days and take the discount; while the other 70% pay as before. a. What is the new average investment in A/R? b. What is the new DS C. How much annual profit is Calspect foregoing? d. If Calspect finances its A/R with 100% debt, and the interest rate is 8.3%, does offering the discount make financial sense?

Answer rating: 100% (QA)

A B 1 A Calspects AR Days and Average Dollar Investment in AR 2 3 Annual Cr... View the full answer