What is the change in investment and npv of proposed change

Assignment Help Financial Management

Reference no: EM131600009

CURRENT SITUATION FOR DYL PICKLE COMPANY:

So = Current sales = $15 million. V = Variable costs as a % of sales = 70% = 0.7. 1 - V = Contribution margin = 30% = 0.3. k = Cost of capital invested in receivables = 15% = 0.15. ACPo = Average collection period = 30 days. (Note: the credit period is 25 days, i.e., net 25.) Bo = Bad debt loss percentage = 3% = 0.03. Do = Discount percentage = 0%. Toughen up on collection policy. New ACP will be 25 days. DS = -$1 million. Bo will go from 3% to 1%.

What are the answers to the following questions?

1. What is the change in Investment? (Enter your answer as a whole number)

2. What is the change in profits? (Enter your answer as a whole number)

3. What is the NPV of the proposed change? (Enter your answer as a whole number)

4. Should the change be made?

Reference no: EM131600009

Questions Cloud

The initial outlay for capital investment proposal : which one would NOT be considered or used in the calculation of the initial outlay for a capital investment proposal?

Using the corporate valuation model approach : Using the corporate valuation model approach, what should be the company's stock price today?

Taking on project in the capital budgeting process : How do we deal with interest expense that result from taking on a project in the capital budgeting process?

What is entry barrier that is source of the monopoly power : What is the entry barrier that is the source of the monopoly power for the following products or producers? List some competitors that keep these products.

What is the change in investment and npv of proposed change : What is the change in Investment? What is the NPV of the proposed change?

Charge the recipient of the signal : Broadcast television and broadcast radio send out signals that can be received by an infinite number of receivers without reducing the quality of the reception.

An investor has two bonds in his portfolio : An investor has two bonds in his portfolio that both have face value of $1,000 and pay 10% annual coupon.

Is given type of good normally provided by private industry : Broadcast television and broadcast radio send out signals that can be received by an infinite number of receivers without reducing the quality of the reception.

How much loss would company recognize n its income statement : Annual fixed costs are $24,000. If Rambles sells 10 units less than breakeven, how much loss would the company recognize n its income statement

User Account

All Pages