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What effective annual interest rate does the firm earn

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Reference no: EM132562996

MANAGEMENT OF ACCOUNT RECEIVABLE

Question 1) A firm offers credit terms of 2/15, net 45. What effective annual interest rate does the firm earn when a customer forgoes the discount?

Question 2) A supplier grants credit terms of 1/5, net 30. What is the effective annual rate of the discount on a purchase of $5,000?

Question 3) Cape May Products currently sells 487 units a month at a price of $79 a unit. The firm believes it can increase its sales by an additional 42 units if it switches to a net 30 credit policy. The monthly interest rate is 0.25 percent and the variable cost per unit is $31.50. What is the incremental cash inflow from the proposed credit policy switch?

Question 4) Currently, Glasgow Importers sells 855 units a month at a price of $39 a unit. By switching to a net 30 credit policy, sales should increase to 950 units while the price remains constant. The monthly interest rate is 0.61 percent and the variable cost per unit is $8. What is the net present value of the proposed credit policy switch?

Question 5) A new customer has placed an order for a turbine engine that has a variable cost of $1.12 million per unit and a credit sales price of $1.64 million. Credit is extended for one period. Based on historical experience, payment for about 1 out of every 178 such orders is never collected. The required return is 2.1 percent per period. What is the NPV per unit if this is a one-time order?

Reference no: EM132562996

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