Worldwide widgets (WW) has annual credit sales of $13,140,000 on terms of net/30. A proposal to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Worldwide widgets (WW) has annual credit sales of $13,140,000 on terms of net/30. A proposal to offer terms of 2/10, n/30 is being considered. The proposed discount is expected to increase sales by 1% over the current level. Currently the average collection period (ACP) is 36.2 days. The change in policy is expected to result in 65% of customers taking the discount (paying in 10 days), and the remainder paying in an average of 38 days. WW has a cost of capital of 10.8%. a) What is the expected change in the annual pre-tax cost of investment in receivables? b) What is the discount itself expected to cost WW (in S)? I Worldwide widgets (WW) has annual credit sales of $13,140,000 on terms of net/30. A proposal to offer terms of 2/10, n/30 is being considered. The proposed discount is expected to increase sales by 1% over the current level. Currently the average collection period (ACP) is 36.2 days. The change in policy is expected to result in 65% of customers taking the discount (paying in 10 days), and the remainder paying in an average of 38 days. WW has a cost of capital of 10.8%. a) What is the expected change in the annual pre-tax cost of investment in receivables? b) What is the discount itself expected to cost WW (in S)? I
Expert Answer:
Answer rating: 100% (QA)
a To calculate the expected change in the annual pretax cost of investment in receivables we need to ... View the full answer
Related Book For
Accounting What the Numbers Mean
ISBN: 978-0073527062
9th Edition
Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele,
Posted Date:
Students also viewed these finance questions
-
The Pettit Corporation has annual credit sales of $2 million. Current expenses for the collection department are $30,000, bad debt losses are 2 percent, and the days sales outstanding is 30 days....
-
The Real Deal Corporation has annual credit sales of $57 million. The average collection period is 34 days. What is the average investment in accounts receivable as shown on the balance sheet?
-
The Newkirk Corporation has annual credit sales of $29 million. The average collection period is 34 days. What is the average investment in accounts receivable as shown on the balance sheet?
-
State Newtons second law of motion. What are the limitations on the use of Newtons second law? Explain.
-
The Windshield division of Cargo Co. makes windshields for use in Cargos Assembly division. The Windshield division incurs variable costs of $350 per windshield and has capacity to make 100,000...
-
a. Why are ratios useful? What are the five major categories of ratios? b. Calculate DLeons 2019 current and quick ratios based on the projected balance sheet and income statement data. What can you...
-
You are the sales director for a company with 1,125 customers generating $30 million in sales. Calculate the number of customers and sales generated using the 80:20 rule.
-
Griffin Enterprises issues a $660,000, 45-day, 4% note to Romo Industries for merchandise inventory. a. Journalize Griffin Enterprises' entries to record: 1. The issuance of the note. 2. The payment...
-
8f Find error propagation. Use: f include the units in your answer. == 1 F delf delf delf {[(delxx] + [(dely) 6y] + [(12)z]} to solve. Be sure to delz
-
There is a paradigm that - "There is no point in training staff because they leave so it is an expensive and time consuming exercise!" Q: What is your opinion about the above paradigm?
-
8. Let 7 be the triangle with vertices (1, 1), (3,-3), and (2. 1). Find the coordinates of the vertices of the image of T under the mlrix fransformalion defined hy and ec- gle
-
Provide Brief Explanation about the statement above. 6.The Internet has eliminated problems of informational asymmetry in health care.
-
Define International Governmental Organizations (IGOs) and Non-Governmental Organizations (NGOs). Identify two IGOs and two NGOs that appear to be efficient in achieving its general goals and...
-
What are struggles over working conditions and also about the surplus product?
-
U se logarithm to solve 6 e ^ ( 9 x + 8 ) + 2 = 7 4
-
A semi-annual coupon Corporate bond is quote das 85.94. This bond has 16 year sti maturity with a coupon rate of 5%. What is the current yield on this bond?
-
What is the NPV of the following set of cash flows if the required return is 16%? Year 0 1 2 3 4 Cash Flow $10,000 $1,000 $10,000 $10,000 $5,000 What is the payback period of a $19,000 investment...
-
Is it a breach of fiduciary duty for a director of a real estate investment trust (REIT) negotiating a joint venture on behalf of the REIT with another director for the development of a portfolio of...
-
Proco had an account payable of $16,800 due to Shirmoo, Inc., one of its suppliers. The amount was due to be paid on January 31. Proco did not have enough cash on hand then to pay the amount due, so...
-
Jackman, Inc., makes and sells many consumer products. The firms average contribution margin ratio is 30 percent. Management is considering adding a new product that will require an additional...
-
The concept of financial leverage was introduced in Chapter 7 and expanded on in Chapter 11. In Exercise 7.15 you were asked to describe the risks associated with financial leverage. You should now...
-
The chapter provides sample goals for an initial sales call on a prospect. (a) What other goals can you come up with that might be appropriate for an initial sales call? (b) Develop three or four...
-
Who is currently in your own network that you could use for prospecting? How might you add to your network?
-
What are some reasons a potential prospect might not be readily accessible? How far should you go to try to overcome such an accessibility problem before you move to the next lead?
Study smarter with the SolutionInn App