Credit standards to increase its currently sagging sales

Assignment Help Financial Management

Reference no: EM132036591

Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed? relaxation, sales are expected to increase by 10?% from 14,000 to 15,400 units during the coming? year; the average collection period is expected to increase from 45 to 55 days; and bad debts are expected to increase from 2.5?% to 44% of sales. The sale price per unit is $38?, and the variable cost per unit is $28.The? firm's required return on? equal-risk investments is 24.5?%.

Evaluate the proposed relaxation, and make a recommendation to the firm.

(Note:Assume a 365-day year.)

The additional profit contribution from an increase in sales is

The amount of cost that will be saved due to the reduction in average? A/R is

The net profit from the proposed cash discount is

Reference no: EM132036591

Questions Cloud

Why is important to continuously manage-control portfolio : Why is it important to continuously manage and control your portfolio? Explain.

Proportion of market portfolio is comprised of each stock : The share prices for stocks A and B are $20 and $5, respectively. What proportion of the market portfolio is comprised of each stock?

What was average real risk-free rate over time period : What was the average real risk-free rate over this time period?

Current financial news article : How it either ties in with subject matter covered in the textbook, and/or pertains to your organization or how you could apply it to your organization.

Credit standards to increase its currently sagging sales : Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales.

Manufacturers of fine zithers : You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly.

Compute the duration of this security : Compute the duration of this security assuming that the PSA remains constant at 150%.

What amount should janessa should be saving each year : Janessa is 29 years old and she is about to start her first full-time job. What amount should Janessa should be saving each year?

What interest rate are the two options equivalent : What will your monthly payments be under the dealer’s 0% financing option. At what interest rate are the two options equivalent?

User Account

All Pages