What is the amount of payment made

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Reference no: EM133023618

Bradford Construction

Supply Company is suffering from a prolonged decline in new construction in its sales area. In an attempt to improve its cash? position, the firm is considering changes in its? accounts-payable policy. After careful? study, it has determined that the only alternative available is to slow disbursements. Purchases for the coming year are expected to be ?$ 38 million. Sales will be ?$60 ?million, which represents about a 20 percent drop from the current year.? Currently, Bradford discounts approximately 20 percent of its payments at 5 ?percent, 10 ?days, net 45 ?, and the balance of accounts is paid in 45 days. If Bradford adopts a policy of payment in 60 days or 90?days, how much can the firm gain if the annual opportunity cost of investment is 9 ?percent? What will be the result if this action causes Bradford Construction suppliers to increase their prices to the company by 0.4 percent to compensate for the 90?-day extended term of? payment? In your? calculations, use a? 365-day year and ignore any compounding effects related to the expected returns.

a,) Under current credit terms of 5 ?percent, 10 ?days, net 45?, what is the amount of payment made in 10 days after purchase in order to obtain the? discount?

b.) What is amount of discount the firm can earn under the current policy?

c.) First if Bradford adopts a policy of payment in 60 days, how much interest can it earn on the payment that earns a discount over the extended period.

d.) Second, if Bradford adopts a policy of payment in 90 days after? purchase,

e.) If Bradford adopts the policy of payment in 90 ?days, the amount the firm can gain from the new payment policy

Reference no: EM133023618

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