User Account

All Pages

Should the finance manager proposal be accepted

Assignment Help Finance Basics
Reference no: EM132999291

Home Depot expects sales of $20 million this year under the current credit policy. The present credit terms is net 30 but the DSO is actually 45 days, and the bad debt loss is 3% of sales. Also, Home Depot's cost of capital is 10%, and its total variable costs is running at 70% of sales. Since Home Depot wants to improve its profitability, the Finance Manager is proposing to change the credit term to 2/15, net 30. The Finance Manager predicts that sales would increase by 10% as a result and that 75% of all customers would take advantage of the new discount with the rest paying on time. The bad debt loss would fall to 1%. Should the Finance Manager's proposal be accepted? How much would the pre-tax profits change before and after this proposal?

You must show all calculation steps, providing a final answer only will not get you full marks.

Reference no: EM132999291

Questions Cloud

Identify the true statement : a. Miller and Modigliani hypothesised that dividend policy has a significant impact on shareholder wealth, as it involves a trade-off between higher or lower di
What is the expected ex-dividend share price : Assume the current share price of Company A is $4.50 and on the following day these shares will begin trading ex-dividend. If the dividend is 40 cents per share
Determine the total costs of sales departments : HomeLife Life Insurance Company has two service, Determine the total costs of the advertising and sales departments after using the step method of allocation.
Advantages of trading index futures : You are the founder and managing director of Speculative Capital Corp, a managed futures macro hedge fund. After spending the past 6 months fundraising and prom
Should the finance manager proposal be accepted : Home Depot expects sales of $20 million this year under the current credit policy. The present credit terms is net 30 but the DSO is actually 45 days, and the b
What will be the future value of that account : If you deposit that tax savings in a savings account for the next four years at 6 percent, what will be the future value of that account?
Perform a fundamental analysis of the overall economy : As an investment analyst, submit a brief report on how will COVID-19 outbreaks affect the stock market and economy in the world and Malaysia
What must the cost of goods manufactured be : What must the cost of goods manufactured be? If the cost of goods sold is $200,000 and the ending finished goods inventory is $15,000.
Describe starlink satellite network : Describe Starlink satellite network (an internet provider program of SpaceX)'s funding path in detail, including seed funding, series A,B,C funding, and how it

Reviews

Write a Review

Finance Basics Questions & Answers

  Member of association of fundraising professionals

It needs to be around 300 to 325 words. Its for a graduate level MBA course. Would you require a new development office staff member to become a member of Association of Fundraising Professionals (AFP)? Why, or why not? Would you pay them a 10% co..

  Uses the market value of equity to determine

Credit Limit. Refer to question 8. What will Mary and Marty's credit limit be if the bank uses the market value of equity to determine their credit limit and will loan them 70% of the equity?

  If you bought a 1000 face value cd that matured in nine

1. if you bought a 1000 face value cd that matured in nine months and which was advertised as paying 9 annual interest

  Why is credit enhancement required in a securitization

What entity determines the amount of securities needed in a securitization?

  Length is not normally distributed

Suppose that the average pop song length in America is 4 minutes with a standard deviation of 1.25 minutes.

  What is the cost variance for chatham clinic

Chatham Clinic has accumulated the following information regarding its patient visits: Static budget: Patient visits: 1,500 Variable cost per visit: $50 Fixed costs: $100,000 Actual results: Patient visits: 1,600 Variable cost per visit: $55 Fixed..

  Discuss the conditions under which the capital expenditure

Discuss the conditions under which the capital expenditure of a foreign subsidiary might have a positive NPV in total currency terms but be unprofitable from the parent firm's perspective.

  An investor recently purchased a corporate bond which

an investor recently purchased a corporate bond which yields 9 percent. the investor is in the 36 percent tax bracket.

  Personal net worth during different stages of life

Discuss what changes might take place in your personal net worth during different stages of your life. How might these changes affect your credit capacity? Mention at least three different stages of life.

  How much should her monthly payment

If she plans on paying the loan off in 7 years after the 3 years spent in college how much should her monthly payment be?

  Firms often involve themselves in projects that do not

firms often involve themselves in projects that do not result directly in profits. do these projects contradict the

  Write a summary of the article who manages risk

Write a summary of the article Who Manages Risk and an Empirical Examination of Risk Management Practices in the Gold Mining Industry"

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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