The firm has required return on? equal-risk investments

Assignment Help Financial Management
Reference no: EM131933662

Shortening the credit period. A firm is contemplating shortening its credit period from 30 to 20 days and believes? that, as a result of this? change, its average collection period will decline from 36 to 28 days. Bad-debt expenses are expected to decrease from 1.4% to 1.1 % of sales. The firm is currently selling 11,700 units but believes that as a result of the proposed? change, sales will decline to 9,700 units. The sale price per unit is $56?, and the variable cost per unit is $45. The firm has a required return on? equal-risk investments of 25.4%. Evaluate this? decision, and make a recommendation to the firm. ?(Note?: Assume a? 365-day year.)

Reference no: EM131933662

Questions Cloud

Find the net present value of project : Find the Net Present Value of Project A and B. if Trudeau has enough resources to invest both into project A and B separately, will he accept them?
Credit risk contributed to recent financial crisis : It has been argued that inaccurate measures of credit risk contributed to the recent financial crisis.
Analysis of collections indicated that customers payments : A recent analysis of collections indicated that customers' payments were in the mail an average of 2.5 days.
Calculate the? firm cash conversion cycle : Calculate the? firm's operating cycle. Calculate the? firm's cash conversion cycle.
The firm has required return on? equal-risk investments : The firm has a required return on? equal-risk investments of 25.4%. Evaluate this? decision, and make a recommendation to the firm.
Why encouraging minority investor involvement : Discuss the components of CEO pay, the rationale behind these compensation packages and why encouraging minority investor involvement
Considering cash purchase-compute net present value : The Clark Corporation desires to expand. It is considering a cash purchase of Kent Enterprises for $2.7 million. Compute the net present value.
What is the risk-free rate of return-market risk premium : What is the risk-free rate of return? what is the market risk premium?
Uses standard costing system with the standards : Sammy Corp manufactures helmets. Sammy uses a standard costing system with the following standards. What is the Direct Materials Price Variance ?

Reviews

Write a Review

Financial Management Questions & Answers

  How much more will that amount be than the cash price

John Walters is comparing the cost of credit to the cash price of an item. If John makes a down payment of $100 and pays $35 a month for 24 months.

  Explanation of differences between long call-short call

Write a simple explanation of the differences between: 1- Long Call 2- Short Call 3- Long Put 4- Short Put.

  Cash-accounts receivable and inventory

Consider the Current Asset accounts (Cash, Accounts Receivable and Inventory) indivuidally and as a group. What impact will the following transaction have on each account AND current asset in total?  Don't concern yourself with any changes to the lia..

  How would you determine the value of this product

How would you determine the value of this product? What price do you think Compressor Controls should charge for this product?

  What is the amount of each interest payment

A 5% $1,000 par value bond sells at $900 and matures in 10 years. What is the amount of each interest payment?

  Which are part of savings and time deposits

In recent years Sweep Programs have grown throughout the U.S. With this financial innovation, banks automatically sweep excess funds from their customers’ checkable deposits into interest bearing MMDAs, which are part of savings and time deposits.

  Market instruments include both long-term debt-common stocks

Capital market instruments include both long-term debt and common stocks.

  What position should you take in the underlying asset

What position should you take in the underlying asset, derivative A, and derivative B to be delta- gamma-, and vega-neutral today?

  Opportunity cost of capital-what is price of common stock

A common stock will pay a dividend next year (i.e., at t=1) of $5.00. For three years after that (i.e., for t=2, t=3, and t=4), the dividend will grow at 7% per year. After t=4, the dividend will grow at 3% per year, forever. If the opportunity cost ..

  Depreciated straight-line to zero over year project life

You estimate the sales price to be $10 per unit and sales volume to be 3,000 units in year 1; 10,000 units in year 2; and 1,000 units in year 3. The project has a three-year life. Variable costs amount to $3 per unit and fixed costs are $25,000 per y..

  What stock price is expected one year from now

What stock price is expected 1 year from now? $ What is the estimated required rate of return on Woidtke's stock?

  Increase the real rate

The CPI index increased from 244.4 to 255.9 over the year and the real rate is 4.33%. If you had $450 in the bank in the beginning of the year, how much do you have now?

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