Please solve it with formulas in the provided excel template.

2. Question 2 consists of parts a, b, and c- a. Argo sells maintenance services to various private jet operators. For these, it demands payment within 20 days. Argo is considering changing this policy to 1.2%/3, net 20. What is the implicit effective annual rate in this payment policy? b. Argo's maintenance service business grosses some $3M per year before discounts and its average days receivable is 15 (unlike the overall business where this number is -15). If 25% of Argo's clients opt to pay earlier and get the 1.1% discount, what will be the change in the service business's receivables? If Argo's cost of capital is 5%, what are the projected savings of this change in policy? If Argo's gross margin is 30%, by how much will gross dollar revenues have to rise to offset the loss from discounts? In percent? C. A new client from out of town is quoted $3,500 for a repair. The service people ask you to approve this. You do a quick check on the client and assess an 8% default risk. What is the NPV of the client? What is the break-even probability? What is the minimum probability of collecting for you to approve the service? b) Average Collection Period c) One-Time Client 1 a) Effective Annual Rate (EAR) 2 3 Notional purchase 4 Discount (%) 5 Days difference 6 7 Discount ($) 8 Rate (%) 9 Days difference in 1 year 10 11 EAR 12 13 14 15 Gross revenue Avg. receivables before new policy % paying early Avg. receivables after new policy Change in receivables Cost of capital Projected savings in capital costs minus: discounts Projected savings net of discounts Gross margin Gross revenues must rise by: - in dollars - in percent Repair cost Default probability NPV of client Break-even probability Extend credit if probability of getting paid is higher than 16 2. Question 2 consists of parts a, b, and c- a. Argo sells maintenance services to various private jet operators. For these, it demands payment within 20 days. Argo is considering changing this policy to 1.2%/3, net 20. What is the implicit effective annual rate in this payment policy? b. Argo's maintenance service business grosses some $3M per year before discounts and its average days receivable is 15 (unlike the overall business where this number is -15). If 25% of Argo's clients opt to pay earlier and get the 1.1% discount, what will be the change in the service business's receivables? If Argo's cost of capital is 5%, what are the projected savings of this change in policy? If Argo's gross margin is 30%, by how much will gross dollar revenues have to rise to offset the loss from discounts? In percent? C. A new client from out of town is quoted $3,500 for a repair. The service people ask you to approve this. You do a quick check on the client and assess an 8% default risk. What is the NPV of the client? What is the break-even probability? What is the minimum probability of collecting for you to approve the service? b) Average Collection Period c) One-Time Client 1 a) Effective Annual Rate (EAR) 2 3 Notional purchase 4 Discount (%) 5 Days difference 6 7 Discount ($) 8 Rate (%) 9 Days difference in 1 year 10 11 EAR 12 13 14 15 Gross revenue Avg. receivables before new policy % paying early Avg. receivables after new policy Change in receivables Cost of capital Projected savings in capital costs minus: discounts Projected savings net of discounts Gross margin Gross revenues must rise by: - in dollars - in percent Repair cost Default probability NPV of client Break-even probability Extend credit if probability of getting paid is higher than 16