Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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Chapter 21, Problem 9P
Grunewald Industries sells on terms of 2/10, net 40. Gross sales last year were $4,562,500 and accounts receivable averaged $437,500. Half of Grunewald’s customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald’s nondiscount customers? (Hint: Calculate daily sales based on a 365-day year, calculate the average receivables for discount customers, and then find the DSO for the nondiscount customers.)
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Grunewald Industries sells on terms of 1/10, net 40. Gross sales last year were $4,453,000 and accounts receivable averaged $427,000. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald's nondiscount customers? (Hint: Calculate daily sales based on a 365-day year, calculate the average receivables for discount customers, and then find the DSO for the nondiscount customers.) Do not round intermediate calculations. Round your answers to two decimal places.
McEwan Industries sells on terms of 3/10, net 30. Total salesfor the year are $1,921,000; 40% of the customers pay on the 10th day and take discounts,while the other 60% pay, on average, 70 days after their purchases.a. What is the days sales outstanding?b. What is the average amount of receivables?c. What is the percentage cost of trade credit to customers who take the discount?d. What is the percentage cost of trade credit to customers who do not take the discountand pay in 70 days?e. What would happen to McEwan’s accounts receivable if it toughened up on its collectionpolicy with the result that all nondiscount customers paid on the 30th day?
McDowell Industries sells on terms of 3/10, net 30. Total sales for the year are $912,500; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 40 days after their purchases.
What is the day’s sales outstanding?
What is the average amount of receivables?
What is the percentage cost of trade credit to customers who take the discount?
What is the percentage cost of trade credit to customers who do not take the discount and pay in 40 days.
What would happen to McDowell’s account receivable if it toughened up on its collection policy with the result that all nondiscount customers paid on the 30th day?
Chapter 21 Solutions
Intermediate Financial Management
Ch. 21 - a. Working capital; net working capital; net...Ch. 21 - Prob. 2QCh. 21 - Is it true that, when one firm sells to another on...Ch. 21 - What are the four elements of a firm’s credit...Ch. 21 - Prob. 5QCh. 21 - Prob. 6QCh. 21 - Prob. 7QCh. 21 - Is it true that most firms are able to obtain some...Ch. 21 - What kinds of firms use commercial paper?Ch. 21 - Prob. 1P
Ch. 21 - Medwig Corporation has a DSO of 17 days. The...Ch. 21 - What are the nominal and effective costs of trade...Ch. 21 - A large retailer obtains merchandise under the...Ch. 21 - A chain of appliance stores, APP Corporation,...Ch. 21 - Prob. 6PCh. 21 - Calculate the nominal annual cost of nonfree trade...Ch. 21 - Prob. 8PCh. 21 - Grunewald Industries sells on terms of 2/10, net...Ch. 21 - The D.J. Masson Corporation needs to raise...Ch. 21 - Negus Enterprises has an inventory conversion...Ch. 21 - Strickler Technology is considering changes in its...Ch. 21 - Dorothy Koehl recently leased space in the...Ch. 21 - Suppose a firm makes purchases of $3.65 million...Ch. 21 - The Thompson Corporation projects an increase in...Ch. 21 - The Raattama Corporation had sales of $3.5 million...Ch. 21 - Karen Johnson, CFO for Raucous Roasters (RR), a...Ch. 21 - Prob. 2MCCh. 21 - Prob. 3MCCh. 21 - Prob. 4MCCh. 21 - Prob. 5MCCh. 21 - Prob. 6MCCh. 21 - Prob. 7MCCh. 21 - Prob. 8MCCh. 21 - What is the impact of higher levels of accruals,...Ch. 21 - Prob. 10MCCh. 21 - Prob. 11MCCh. 21 - Prob. 12MCCh. 21 - Prob. 13MCCh. 21 - Prob. 14MCCh. 21 - Prob. 15MCCh. 21 - Prob. 16MC
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- McDowell Industries sells on terms of 3/10, net 30. All sales for the year are on credit amount to Ksh 912,500,000; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 40 days after their purchases. a. What is the days’ sales outstanding? b. What is the average amount of receivables? c. What is the percentage cost of trade credit to customers who take the discount? d. What is the percentage cost of trade credit to customers who do not take the discount and pay in 40 days? e. What would happen to McDowell’s accounts receivable if it toughened up on its collection policy with the result that all non-discount customers paid on the 30th day?arrow_forwardMcEwan Industries sells on terms of 3/10, net 30. Total sales for the year are $1,921,000; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 70 days after their purchases.a. What is the days sales outstanding?b. What is the average amount of receivables?c. What is the percentage cost of trade credit to customers who take the discount?d. What would happen to McEwan’s accounts receivable if it toughened up on its collection policy with the result that all nondiscount customers paid on the 30th day?arrow_forwardMcDowell Industries sells on terms of 3/10, net 30. All sales for the year are on credit amount to Ksh 912,500,000; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 40 days after their purchases. a. What is the percentage cost of trade credit to customers who do not take the discount and pay in 40 days? b. What would happen to McDowell’s accounts receivable if it toughened up on its collection policy with the result that all non-discount customers paid on the 30th day?arrow_forward
- Cost of Trade Credit Grunewald Industries sells on terms of 2/10, net 40. Gross sales last year were $4,562,500 and accounts receivable averaged $437,500. Half of Grunewald’s customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald’s nondiscount customers? (Hint: Calculate daily sales based on a 365-day year, calculate the average receivables for discount customers, and then find the DSO for the nondiscount customers.)arrow_forwardCost of Trade Credit Grunewald Industries sells on terms of 2/10, net 50. Gross sales last year were $4,526,000 and accounts receivable averaged $434,000. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald's nondiscount customers? (Hint: Calculate daily sales based on a 365-day year, calculate the average receivables for discount customers, and then find the DSO for the nondiscount customers.) Do not round intermediate calculations. Round your answers to two decimal places. Nominal cost of trade credit: % Effective cost of trade credit: %arrow_forwardPlease Solve This Question International Industries sells on terms of 3/10, net 50. Gross sales last year were 5,662,500 and accounts receivable averaged 547,500. Half of International’s customers paid on the 15th day and took discounts. What are the nominal and effective costs of trade credit to International’s non-discount customers? (Hint: Calculate sales/day based on a 360-day year, then calculate average receivables of discount customers and then find the DSO for the non-discount customers.arrow_forward
- McEwan Industries sells on terms of 3/10, net 35. Total sales for the year are $1,947,000; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 74 days after their purchases. Assume 365 days in year for your calculations. a. What is the days sales outstanding? Round your answer to two decimal places. days b. What is the average amount of receivables? Do not round intermediate calculations. Round your answer to the nearest cent. c. What is the percentage cost of trade credit to customers who take the discount? If your answer is zero, enter zero. Round your answer to two decimal places. d. What is the percentage cost of trade credit to customers who do not take the discount and pay in 74 days? If your answer is zero, enter zero. Do not round intermediate calculations. Round your answers to two decimal places. Nominal cost: Effective cost: % e. What would happen to McEwan's accounts receivable if it toughened up on its collection policy with…arrow_forwardMcEwan Industries sells on terms of 3/10, net 30. Total sales for the year are $1,921,000; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 70 days after their purchases. d. What is the percentage cost of trade credit to customers who do not take the discount and pay in 70 days?arrow_forward
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