What is the npv of the decision to offer credit

Assignment Help Financial Accounting
Reference no: EM132539668

Question 1: Tile Emporium manufactures tiles and stone pavers. It currently operates as a cash business, with mainly retail customers, but by offering credit it will grow sales to wholesale customers. It is estimated that by offering 30 days' credit, monthly sales will increase by $50,000 while upfront monthly costs will increase by $20,000. Unfortunately, some customers will pay late, while other will not pay at all. Tile emporium estimates that only 50% of its sales will be settled on time if it offers credit, while another 45% will be settled 30 days late. The remaining 5% of sales will result in non-payment. What is the NPV of the decision to offer credit, if the required rate of return is 2% per month?

Option 1: $26,569

Option 2: $26,136

Option 3: $25,656

Option 4: None of the other answers is correct

Option 5: $29,020

Reference no: EM132539668

Questions Cloud

Explain how resources and capabilities : Explain how Resources and capabilities, activities and value proposition are connected in a strategy.
What is the purpose-goal of a strategy : Use mission statement, vision statement, statements of corporate values, and objectives to explain this.
Find what is the company wacc : Find What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
How do we know what our supply chain should look like : How do we know what our supply chain should look like and What aspects should companies take into consideration when designing their supply chain
What is the npv of the decision to offer credit : The remaining 5% of sales will result in non-payment. What is the NPV of the decision to offer credit, if the required rate of return is 2% per month?
What does program benefits management entail : What does program benefits management entail?
What are total annual cash flows over the life of project : What are the total annual cash flows over the life of the project? Pepega Investments is evaluating a proposal to build a new warehouse.
How does financial management : How does financial management differ in a program compared to a project.
Design and develop a small console program for sab : Design and develop a small console program for Sab, enabling her to select the appropriate item and the package

Reviews

Write a Review

Financial Accounting Questions & Answers

  The role of internal audit in the organization

Do you agree with the CFO? If so describe how SOX 404 and CEO/CFO certification removes the need for an internal audit function. If you don't agree, describe what an internal audit function adds beyond SOX 404 and CEO/CFO certification.

  Calculate depreciation expense per mile

Calculate depreciation expense per mile under units-of-activity method - Actual miles driven were 16,100 in 2015 and 10,800 in 2016

  What is the amount of the cash flow to creditors

The beginning and ending total debt balances were $84,652 and $78,613, respectively. The interest paid was $4,767. What is the amount of the cash flow to credit

  Prepare direct materials price variance efficiency

prepare direct materials price variance efficiency variancelabor rate variance labor efficiency variance and pass

  Prepare the appropriate journal entries to recognize

Prepare the appropriate journal entries to recognize the first quarter transactions, currently reported in Other Assets - Holding in the balance sheet.

  What is the advantage of issuing bonds

Your original posting must be at least 250 words and your English usage must be correct. Comment on the postings of 2 other students. These comments must be at least 50 words long and should critique what the other students have said.

  1 when a company spins off a subsidiary by paying out

1. when a company spins off a subsidiary by paying out shares in the subsidiary as a dividend to shareholdersa the firm

  How much will have in account on august

How much will have in account on August 1, or after 7 months? (assume N = 212 days) Recall that the interest rate (I/Y) represents the periodic rate

  Analyze government wide financial statements

Write a 1-2 page summary of how ratios can be used to analyze government wide financial statements. Include at least 5 ratios as examples in your summary.

  Companies are required to assign each category of securities

De?ne each of these categories of securities and discuss the accounting treatment for each category. Discuss how companies are required to assign each category of securities into its current and noncurrent portions.

  Fixed expenses and variable expenses

The Breiden Company sells rodaks for $6.00 per unit. Fixed expenses total $37,500 per month and variable expenses are $2.00 per unit. How many rodaks must be sold each month to realize a profit before income taxes of 15% of sales (to the nearest whol..

  What is the desired profit for the year

Rica Company is a price-taker and uses a target-pricing approach. Refer to the following information: What is the desired profit for the year?

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