After 90 days, the invoice is turned over to a collection agency that collects, on average,...
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After 90 days, the invoice is turned over to a collection agency that collects, on average, 50% of the invoice one month after the referral and charges a 30% commission on the invoice amount (not the amount collected). Re-calculate the NPV and determine if trade credit should still be offered. (1) COLLECTION PERIOD (CP) (2) DSO Expected NPV of Credit Extension (3) PAYMENT PROBABILITY (4) COLLECTION COSTS (EXP) (5) COLLECTION CASH FLOW (6) PV [PV of Column (5) less (VCR)(S) (7) Expected PV [Column (3) x Column (6)] After 90 days, the invoice is turned over to a collection agency that collects, on average, 50% of the invoice one month after the referral and charges a 30% commission on the invoice amount (not the amount collected). Re-calculate the NPV and determine if trade credit should still be offered. (1) COLLECTION PERIOD (CP) (2) DSO Expected NPV of Credit Extension (3) PAYMENT PROBABILITY (4) COLLECTION COSTS (EXP) (5) COLLECTION CASH FLOW (6) PV [PV of Column (5) less (VCR)(S) (7) Expected PV [Column (3) x Column (6)]
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To calculate the expected NPV Net Present Value of credit extension considering the collection period payment probability collection costs and collect... View the full answer
Related Book For
Core Concepts Of Accounting Information Systems
ISBN: 9781118738108
1st Canadian Edition
Authors: Mark G. Simkin, Carolyn A. Strand Norman, Scott Paquette
Posted Date:
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