Silicon Wafers Inc., is debating whether or not to extend credit to a particular customer. Silicon's products, primarily used in the manufacture of semiconductors, currently sell for P1,140 per unit. The variable cost is P760 per unit. The order under consideration is for 15 units today; payment is promised in 30 days. Required: a. If there is a 20 percent chance of default, should Silicon fill the order? The required return is 2 percent per month. This is a one-time sale and the customer will not buy if credit is not extended. b. What is the break-even probability in (a)? C. In general terms, how do you think your answer to (a) will be affected if the customer will purchase the merchandise for cash if the credit is refused? The cash price is P1,090 per unit.

Silicon Wafers Inc., is debating whether or not to extend credit to a particular customer. Silicon's products, primarily used in the manufacture of semiconductors, currently sell for P1,140 per unit. The variable cost is P760 per unit. The order under consideration is for 15 units today; payment is promised in 30 days. Required: a. If there is a 20 percent chance of default, should Silicon fill the order? The required return is 2 percent per month. This is a one-time sale and the customer will not buy if credit is not extended. b. What is the break-even probability in (a)? C. In general terms, how do you think your answer to (a) will be affected if the customer will purchase the merchandise for cash if the credit is refused? The cash price is P1,090 per unit.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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XYZ, Inc., produces and commercializes engines for cars. To stimulate sales, the financial manager is contemplating lengthening its credit period from the existing net 30 terms to net 35 terms. The credit analyst estimates that the new credit policy increases sales by 15 percent. The financial manager asks you to analyze the impacts of the proposed credit change on the firm's value. The variable costs, as a percent of sales, equal 70%. The existing monthly credit sales is $90 million. The existing bad debt loss rate is 29% and will increase by o.75% after lengthening the credit period. The existing credit & collection expenses equal 2.5% of sales and those under 35-day terms will be 3% of sales. The company's cost of capital is presently 10 percent Under the new credit policy, the firm offers a 2% cash discount if they pay within one week and the percent of sales made to cash discount-takers will be 15%. 1) Calculate the NPV of one day's sales under the existing credit policy
quick computing currently sells 7 million computer chips each year at a price of $12 per chip. It is about to introduce a new chip, and it forecasts annual sales of 22 million of these improved chips at a price of $15 each. However, demand for the old chip will decrease, and sales of the old chip are expected to fall to 1 million per year. The old chips cost $6 each to manufacture, and the new ones will cost $10 each. What is the proper cash flow to use to evaluate the present value of the introduction of the new chip?
Anti-Corona, a distributor of facial mask, predicts that it will purchase 306,000 masks next year. Anti-Corona estimates that 25,500 masks will be required each month. A supplier quotes a price of $10 per facial mask. The supplier also offers a special discount option: If all 306,000 masks are purchased at the start of the year, a discount of 3% off the $10 price will be given. Anti-Corona can invest its cash at 12% per year. It costs Anti-Corona $300 to place each purchase order. (a)What is the opportunity cost of interest forgone from purchasing all 306,000 units at the start of the year instead of in 12 monthly purchases of 25,500 units per order? (b) Should Anti-Corona purchase 306,000 units at the start of the year or 25,500 units each month? Show your calculations with reasons 4(c) The company is a multinational company with many branches in different countries around the world. The 12% for return on cash is based on expected return of cash in US. The company is planning to…
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RG Motors has been approached by a new customer with an offer to purchase 5,000 units of its hand-free, Wi-Fi-enabled automotive model – the SMART, at a price of RM18,000 per automobile. RG’s other sales would not be affected by this new customer offer. RG normally produces 100,000 units of its SMART model per year but only plans to produce and sell 90,000 units in the coming year. The normal sales price is RM35,000 per SMART. Unit cost information for the normal level of activity is as follows: Table 7: Production Costs Total Cost RM Direct materials 10,000 Direct labor 2,000 Variable overhead 4,000 Fixed overhead 8,000 Total 24,000 Fixed overhead will not be affected by whether or not the special order is accepted. Required: (i) List the relevant costs and benefits of the two alternatives of the special order. (ii) Propose whether operating income increase or decrease if the order is accepted with calculation details.
NUBD Inc. is considering two average-risk alternative ways of producing its patented polo shirts. Process X has a cost of P8,000 and will produce net cash flows of P5,000 per year for 2 years. Process Y will cost P11,500 and will produce cash flows of P4,000 per year for 4 years. The company has a contract that requires it to produce the shirts for 4 years, but the patent will expire after 4 years, so the shirts will not be produced after 4 years. Inflation is expected to be zero during the next 4 years. If cash inflows occur at the end of each year, and if NUBD's cost of capital is 10 percent, by what amount will the better project increase NUBD's value? *
A holder of a 90-day bill with 40 days left to maturity and a face value of $ 100, 000 chooses to sell it into the market. If bills maturing in 40 days are currently yielding 1.75% per annum, what price will be obtained? (Assume there are 365 days in a year, and answers must be rounded to two decimal places) $ Please only use a plain number as your answer and don't insert a comma. For example, if you get 1000, please use 1000, and don't use 1,000.
Dublin Chips is a manufacturer of prototype chipsbased in Dublin, Ireland. Next year, in 2018, Dublin Chips expects to deliver 615 prototype chips at an averageprice of $95,000. Dublin Chips’ marketing vice president forecasts growth of 65 prototype chips per yearthrough 2024. That is, demand will be 615 in 2018, 680 in 2019, 745 in 2020, and so on.The plant cannot produce more than 585 prototype chips annually. To meet future demand, Dublin Chipsmust either modernize the plant or replace it. The old equipment is fully depreciated and can be sold for$4,200,000 if the plant is replaced. If the plant is modernized, the costs to modernize it are to be capitalized and depreciated over the useful life of the updated plant. The old equipment is retained as part of the modernizealternative. The following data on the two options are available: Modernize ReplaceInitial…
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Your factory has been offered a contract to produce a part for a new printer. The contract would last for three years, and your cash flows from the contract would be $5.17 million per year. Your upfront setup costs to be ready to produce the part would be $8.17 million. Your discount rate for this contract is 8.3% a. What does the NPV rule say you should do? b. If you take the contract, what will be the change in the value of your firm?
23) Can i get help with this question please
NUBD normally sells its headphones for P40 each. A discount chain is interesting in purchasing NUBD's excess capacity of 5,000 watches. This special order would not affect regular sales or the cost structure above. NUBD's profits for the year will increase as long as the price on this special order exceeds:

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