What is the expected change in the annual

Assignment Help Business Management
Reference no: EM132691178

Worldwide widgets (WW) has annual credit sales of $13,140,000 on terms of net/30. A proposal to offer terms of 2/10, n/30 is being considered. The proposed discount is expected to increase sales by 1% over the current level. Currently the average collection period (ACP) is 36.2 days. The change in policy is expected to result in 65% of customers taking the discount (paying in 10 days), and the remainder paying in an average of 38 days. WW has a cost of capital of 10.8%.

a) What is the expected change in the annual pre-tax cost of investment in receivables? [Ignore all other costs and benefits associated with the change in credit policy]

b) What is the expected change in WW's annual bad debt losses if bad debt losses decrease from 2.25% to 1.85% of total credit sales? [Ignore your answer to part (a) and all other costs]

c) What is the discount itself expected to cost WW (in $)?

Reference no: EM132691178

Questions Cloud

Which financial statement accounts will not require : When preparing the consolidated statements for 2020, which of the following financial statement accounts will not require a consolidated adjustment?
Make the journal entry Deloit makes : On January 1st the fair market value of Acme's land was $125,000; Make the journal entry Deloit makes when it acquires the Acme stock
Find the realized compound yield before taxes : A newly issued bond pays its coupons once annually. Its coupon rate is 9.2%, its maturity is 20 years, and its yield to maturity is 11%.
Analysis of the implications of the empirical evidence : Discuss including an analysis of the implications of the empirical evidence on market efficiency for individual investors.
What is the expected change in the annual : Worldwide widgets (WW) has annual credit sales of $13,140,000 on terms of net/30. A proposal to offer terms of 2/10, n/30 is being considered
What are the cost concepts used in manufacturing accounting : What are the cost concepts used in manufacturing accounting and what are the basic product cost components? Which, in your opinion, is most important today?
Define npv and discuss its advantages and disadvantages : Define Npv and discuss its advantages and disadvantages, making reference to the objective of the firm and wherever possible using examples and equations to ass
What would be the amount of consolidated goodwill : What would be the amount of Consolidated Goodwill on March 31.2020? Assume that there was no amortization of any purchase price discrepancy during the year.
Define staged financing : Define staged financing. Justify whether this is an efficient risk-minimising mechanism for venture capitalists.

Reviews

Write a Review

Business Management Questions & Answers

  Individuals who exhibit generally competitive culture

Methods for Managing Differences. How would you use the recommended method when working with individuals who exhibit a generally competitive culture?

  Provide a brief background of the team

Provide a brief background of the team and leader you are evaluating. What actions, behaviors, characteristics make this team successful?

  Why is safety important in the workplace

Why do safety policies work better when there are absolutely no exceptions? How is this different from other types of change?

  Installing windows server 2016 in a physical

Please explain what the difference is with installing Windows server 2016 in a physical, virtual, or cloud environment?

  Breach of an implied warranty

The idea of a seller's being in breach of an implied warranty raises an entirely new issue: Is the seller liable to anyone other than the buyer?

  What happens to the address of a number

What happens to the address of a number in the Cantor set if you multiply it by 3?

  Mobile connectivity and mobile marketing

How has mobile connectivity and mobile marketing impacted the retail landscape? Have your personal shopping habits been impacted? How so?

  Healthcare data retention and data storage

Perform a web search on healthcare data retention and data storage. (HINT: AHIMA has several articles on data retention and data storage)

  Zombeads is looking to increase awareness

Zombeads is looking to increase awareness of its organization on Tulane's campus. What campus groups / organizations would be best for Zombeads to partner with, and why?

  What may be the detrimental impact

What may be the detrimental impact if the time is not handled correctly? Who might you consult to obtain approval for an operational plan?

  Two practical and realistic techniques

Finally, discuss two practical and realistic techniques that you can employ that will effectively target the specific stressors. Discuss the techniques thorough

  Disadvantages of changing to a smart grid system

Describe how a smart grid differs from the grid system currently in use. What are the advantages and disadvantages of changing to a smart grid system?

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