Credit extension plan to break even

Assignment Help Finance Basics
Reference no: EM131872359

Banka Matata Ltd (BML) sells printer cartridges and does not extend credit to its customers. A study commissioned last month revealed that, by offering credit and keeping the price unchanged, BML can increase sales by 40 percent - all new credit customers - while half of the current sales will migrate to credit sales. The cost per unit, however, will increase on average by Shs. 100 reflecting the expenses associated with accounts receivable. The probability of a customer making a payment on a credit sale is 96 percent. Currently BML sells 10,000 cartridges at shs. 9600 per unit and the cost is shs 8600 per unit.

a) Should BML extend credit to its customers?

b) How much should the price change for the credit extension plan to break even?

c) How much should the probability of credit customer making repayment be for the credit extension plan to break even?

Reference no: EM131872359

Questions Cloud

Bond price and the overall credit worthiness of bond : Explain (theoretically) the relationships between current yield, bond price and the overall credit worthiness of a bond.
What is floorplanning : What is floorplanning? List the pros and cons of floorplanning and provide an example of a company that would benefit from floorplanning.
How much interest is paid to bondholders every 6 months : The bonds have a Coupon rate of 2.88% and a Yield to Maturity of 2.84%. The bonds pay interest semi-annually. Answer the following:
Ethical issues involved in engaging in such transactions : What are the ethical issues involved in engaging in such transactions? Were any of the AICPA rules of conduct violated?
Credit extension plan to break even : a) Should BML extend credit to its customers? b) How much should the price change for the credit extension plan to break even?
Individual and corporate tax returns for client : You were engaged to file the 2015 individual and corporate tax returns for client. Do you believe that you violated any of the rules of conduct in AICPA Code.
Fewer state and federal regulations : A smaller percentage of your firm's income will be subject to federal income taxes.
Estimate the revenue expense and gross profit : Estimate the revenue, expense, and gross profit reported from these contracts in the year that the revenue is recognized
Conduct research on the current state of social security : Conduct research on the current state of Social Security. Based on your research, write a three-to-five page paper (not including the title and reference pages)

Reviews

Write a Review

Finance Basics Questions & Answers

  Describe expected rate of return standard deviation

Describe the following:  (a) Expected rate of return, (b) Standard deviation, and  (c) Coefficient of variation.

  What is the addition to retained earnings

What is the net income for the firm? Suppose the company paid out $67,000 in cash dividends. What is the addition to retained earnings?

  Prepare a schedule of expected cash collections for december

You have been asked to prepare a December cash budget for Ashton Company, a distributor of exercise equipment. The following information is available about.

  Explain how the total on the statement of stockholder equity

EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, is a giant database of documents the U.S. Securities and Exchange Commission (SEC).

  Discuss the financials in relation to the initiative

Discuss and interpret the financials in relation to the initiative

  Assume you will receive 1000 at the end of year 1 what is

assume you will receive 1000 at the end of year 1. what is its present value at the beginning of year 1 if you expect

  Project k costs 65000 its expected cash inflows are 15000

project k costs 65000 its expected cash inflows are 15000 per year for 8 years and its wacc is 10. what is the

  The first option is obtaining short term financing

The first option is obtaining short term financing to increase production by 10%. The second option is to issue bonds and increase production by 50%. What is the best option?

  What is the crossover rate for projects

What is the crossover rate for these two projects? What is the NPV of each project at the crossover rate?

  Prepare a yield curve or term structure of interest rates

Bank prime loan charges 3.75% currently. Find yield for 12-month Treasury bills from the Bloomberg website and indicate the size of current default risk premiums for bank prime loans.

  Briefly explain entries of revenue and capital expenditures

Write a 350- to 700-word summary explaining the differences between revenue expenditures and capital expenditures during a useful life. Briefly explain the entries of revenue expenditures and capital expenditures.

  Evaluation of ratios for given financial data''s

Evaluation of ratios for given financial data's and Inventory Turnover and Days' Sales in Inventory

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd