Initiating cash discount, Initiating a cash discount.

Initiating cash discount

Assignment Help Financial Management

Reference no: EM131902282

Initiating a cash discount. Gardner Company currently makes all sales on credit and offers no cash discount. The firm is considering offering a 1?% cash discount for payment within 15 days. The? firm's current average collection period is 60 ?days, sales are 40,000 ?units, selling price is ?$45 per? unit, and variable cost per unit is ?$33. The firm expects that the change in credit terms will result in an increase in sales to 44,000 ?units, that 70?% of the sales will take the? discount, and that the average collection period will fall to 30 days. If the? firm's required rate of return on? equal-risk investments is 25?%, should the proposed discount be? offered?

?(Note?: Assume a? 365-day year.)

Reference no: EM131902282

Questions Cloud

Capital structure change and what is the stock price : What is the value of the firm before the capital structure change and what is the stock price?

Investment outlay for machine for capital budgeting purposes : What is the initial investment outlay for the machine for capital budgeting purposes, that is, what is the Year 0 project cash flow?

Meat sandwhich restaurant chain : Carni Vore represents a meat sandwhich restaurant chain that is expanding into a new, large metropolitan area.

Company current weighted average cost of capital : Compute the company's current weighted average cost of capital. calculate the expected net present value, expected profitability index,

Initiating cash discount : Initiating a cash discount. Gardner Company currently makes all sales on credit and offers no cash discount.

What are the initial franchise fee and royalty fees : We are making the plan for expanding the business( Exporting ) in France from the US. What are the initial franchise fee and royalty fees?

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

Compute the overall income tax rate on harbor income : Compute Harbor's state income tax liability. Compute the overall income tax rate on Harbor's income.

What is the geometric average return for this period : What is the geometric average return for this period?

User Account

All Pages