Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Davis Manufacturing Industries (DMI) produces and sells 20,000 units of a machine tool each year. All sales are on credit, and DMI charges all customers $500 per unit. Variable costs are $350 per unit, and the firm incurs $2 million in fixed costs each year. DMI's top managers are evaluating a proposal from the firm's CFO that the firm relax its credit standards to increase its sales and profits. The CFO believes this change will increase unit sales by 4 percent. Currently, DMI's average collection period is 40 days, and the CFO expects this to increase to 60 days under the new policy. Bad debt expense is also expected to increase from 1 percent to 2.5 percent of annual sales. The firm's board of directors has set a required return of 15 percent on investments with this level of risk. Assume a 365-day year.
a. What is DMI's contribution margin? By how much will profits from increased sales change if DMI adopts the new credit standards?
b. What is DMI's average investment in accounts receivable under the current credit standards? Under the proposed credt standards? What is the cost of this additional investment?
c. What is DMI's cost of marginal bad debt expense resulting from the relaxation of its credit standards? d. What is DMI's net profit/loss from adopting the new credit standards? Should DMI relax its credit standards?
Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..
This report is specific for a core understanding for Financial Accounting and its relevant factors.
Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.
Briefly describe the major differences between a sole proprietorship and a corporation
Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month
What are the implied interest rates in Europe and the U.S.?
State pricing theory and no-arbitrage pricing theory
Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.
The Effect of Financial Leverage and working capital management
Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.
Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.
Time Value of Money project
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd