FIN 310 Chapter 12 Open-Ended Assignment Note: Please put your answers only in the section below the Bold Red sentence at the end of the Required section below. A company with annual sales of $24,000,000 is considering changing its payment terms from net 30 to encourage customers to pay more promptly. The company forecasts that custome respond by paying on day 34 rather than day 44 as at present (assume a 360 day year) but w decrease their purchases by $450,000 per year. The company also forecasts that its idle cas would decrease by $40,000 and administrative costs would be reduced by $35,000 per year. company's variable costs average 66% of sales, it is in the 35% marginal tax bracket, and it cost of capital. Required: A. Calculate the incremental cash flows associated with accepting this proposal, and your cash flows into a cash flow spreadsheet of the type demonstrated in chapter 12 d textbook. B. Calculate the proposal's Net Present Value. C. Calculate the proposal's Internal Rate of Return. D. Calculate the proposal's Net Annual Benefit. E. Explain whether the firm should shorten its payment terms or not. Your answers to this open-ended assignment should be pla the space below this line. A Time Zero Amount Change in A/R balance Profit on change in balance Other W/C change Total Detailed support for above numbers: Years 1 through infinity Admin costs Bad debt changes Contribution margin Discounts Tax on above Total cash flow RE

\begin{tabular}{|l|l|l|l|l|} \hline FIN 310 \\ \hline \multicolumn{2}{|l|}{ Chapter 12 Open-Ended Assignment } & \\ \hline \multicolumn{2}{|l|l|l|l|l|}{} \\ \hline \end{tabular} Note: Please put your answers only in the section below the Bold Red sentence at the end of the Required section below. A company with annual sales of $24,000,000 is considering changing its payment terms frot net 30 to encourage customers to pay more promptly. The company forecasts that custome respond by paying on day 34 rather than day 44 as at present (assume a 360 day year) but vn decrease their purchases by $450,000 per year. The company also forecasts that its idle cast would decrease by $40,000 and administrative costs would be reduced by $35,000 per year. company's variable costs average 66% of sales, it is in the 35% marginal tax bracket, and it cost of capital. A. Calculate the incremental cash flows associated with accepting this proposal, and your cash flows into a cash flow spreadsheet of the type demonstrated in chapter 12 . textbook. B. Calculate the proposal's Net Present Value. C. Calculate the proposal's Internal Rate of Return. D. Calculate the proposal's Net Annual Benefit. E. Explain whether the firm should shorten its payment terms or not. Your answers to this open-ended assignment should be pla the space below this line