Corporate Finance (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
11th Edition
ISBN: 9780077861759
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 28, Problem 15QP
Credit Policy Evaluation Happy Times currently has an all-cash credit policy. It is considering making a change in the credit policy by going to terms of net 30 days. Based on the following information, what do you recommend? The required return is .95 percent per month.
| Current Policy | New Policy | |
| Price per unit | $289 | $296 |
| Cost per unit | $226 | $229 |
| Unit sales per month | 1, 105 | 1,125 |
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Your business currently only accepts cash-only transactions. You are considering making a change by going to terms of net 30 days. With the following information, should you change your credit policy? Required return per month is 1.05 percent.
Current Policy
New Policy
Price per unit
$ 13,150
$ 13,550
Cost per unit
$ 10,500
$ 10,500
Unit sales per month
2,750
3,000
Your business currently only accepts cash-only transactions. You are
considering making a change by going to terms of net 30 days. With the following
information, should you change your credit policy? Required return per month is 1.05
percent.
Current
New Policy
Policy
$ 13,150
$ 10,500
$ 13,550
$ 10,500
Price per unit
Cost per unit
Unit sales per
2,750
3,000
month
Fitzgerald Corporation currently has an all-cash credit policy. It is considering making a
change in the credit policy by going to terms of net 30 days. The required return is .9
percent per month.
Price per unit
Current Policy
$ 245
New Policy
Cost per unit
$ 179
$ 250
$184
Unit sales per month
1,740
1,790
Calculate the NPV of the decision to change credit policies. (A negative answer should
be indicated by a minus sign. Do not round intermediate calculations and round your
answer to 2 decimal places, e.g., 32.16.)
NPV
Chapter 28 Solutions
Corporate Finance (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 28 - Prob. 1CQCh. 28 - Trade Credit forms In what form is trade credit...Ch. 28 - Prob. 3CQCh. 28 - Five Cs or Credit What arc the five Cs of credit?...Ch. 28 - Credit Period Length What are some of the factors...Ch. 28 - Credit Period Length In each of the following...Ch. 28 - Inventory Types What are the different inventory...Ch. 28 - Just-in-Time Inventory If a company moves to a JIT...Ch. 28 - Inventory Costs If a companys inventory carrying...Ch. 28 - Inventory Period At least part of Dells corporate...
Ch. 28 - Prob. 1QPCh. 28 - Size of Accounts Receivable The Paden Corporation...Ch. 28 - ACP and Accounts Receivable Kyoto Joe, Inc., sells...Ch. 28 - Size of Accounts Receivable Tidwell, Inc., has...Ch. 28 - Terms of Sale A firm offers terms of 1/10, net 30....Ch. 28 - ACP and Receivables Turnover Chen, Inc., bas an...Ch. 28 - Size of Accounts Receivable Essence of Skunk...Ch. 28 - Size of Accounts Receivable The Arizona Bay...Ch. 28 - Evaluating Credit Policy Air Spares is a...Ch. 28 - Credit Policy Evaluation Leeloo, Inc., is...Ch. 28 - EOQ Fhloston Manufacturing uses 1,860 switch...Ch. 28 - EOQ The Trektronics store begins each week with...Ch. 28 - EOQ Derivation Prove that when carrying costs and...Ch. 28 - Credit Policy Evaluation The Harrington...Ch. 28 - Credit Policy Evaluation Happy Times currently has...Ch. 28 - Credit Policy The Silver Spokes Bicycle Shop has...Ch. 28 - Break-Even Quantity In Problem 14, what is the...Ch. 28 - Prob. 18QPCh. 28 - Prob. 19QPCh. 28 - Safety Stocks and Order Points Sach, Inc., expects...Ch. 28 - Evaluating Credit Policy Solar Engines...Ch. 28 - Evaluating Credit Policy In the previous problem,...Ch. 28 - Prob. 1MC
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