Should nwt change the credit terms

Reference no: EM132018735

Question: Next Week's Technology (NWT) is evaluating whether to change its credit terms from 2/10, net 30 to 3/10, net 30. At present, 50 percent of NWT's sales are paid on Day 10, whereas, under the new terms, 60 percent of sales will be paid on Day 10. Regardless of the credit terms, half of the customers who do not take the discount are expected to pay on Day 30, whereas the remainder will pay 15 days late (no bad debts exist). But, as a result of the higher cash discount offered with the new terms, sales are expected to increase from $360,000 to $396,000 per year. NWT's variable cost ratio is 80 percent and its cost of funds is 9 percent. All production costs are paid on the day of the sale. Should NWT change its credit terms?

Reference no: EM132018735

Questions Cloud

How much interest have you accrued by that time : How much interest have you accrued by that time?

What is silver company stock worth to you : The next year the common stock of Silver Corp will pay a dividend of S9 64 per share If the company is growing at a rate of 4 69 percent per year.

Examine the direct and indirect impact on immediate health : Begin this assignment by identifying one recent example of an environmental disaster. For example, the BP oil spill or the earthquakes in Haiti or Japan.

Is the bond selling at a discount or at a premium : What is the current value of the bond? Is the bond selling at a discount or at a premium?

Should nwt change the credit terms : Next Week's Technology (NWT) is evaluating whether to change its credit terms from 2/10, net 30 to 3/10, net 30. At present, 50 percent of NWT's sales are paid.

How would you transport the patients and their medication : How would you transport the patients and their medication to the evacuation shelter? Who would monitor the patients at the evacuation shelter?

What is the irr of this project : You have the following cash flows for next 6 years. If your initial investment is $30,000. What is the IRR of this project?

Prepare a bank reconciliation in proper form for august : The correct amount of cheque # 247 is $340, but it was recorded as a cash disbursement of $430. Prepare a bank reconciliation in proper form for August 31, 2015

What types of costs are covered under medicare : What types of costs are covered under Medicare Part A? What types of costs are covered under Medicare Part B?

User Account

All Pages