3. You have looked at the credit policy offered by Kalgoorlie's competitors and have determined that the industry standard credit policy is 1/10, net 40.* The discount will begin to be offered on the first day of the first quarter. You want to examine how this credit policy would affect the cash budget and short-term financial plan. If this credit policy is implemented, you believe that 40 per cent of all sales will take advantage of it, and the accounts receivable period will decline to 36 days. Rework the cash budget and short-term financial plan under the new credit policy and a minimum cash balance of

$100 000. What interest rate are you effectively offering customers? You have recently been hired by Kalgoorlie Manufacturing to work in the newly established treasury department. Kalgoorlie Manufacturing is a small company that produces cardboard boxes in a variety of sizes for different purchasers. Gary Peters, the owner of the company, works primarily in the sales and production areas of the company. Currently, the company puts all receivables in one shoe box and all payables in another. Because of the disorganised system, the finance area needs work, and that is what you have been brought in to do.

The company currently has a cash balance of $305 000, and it plans to purchase new box-folding machinery in the fourth quarter at a cost of $525 000. The machinery will be purchased with cash because of a discount offered. The company’s policy is to maintain a minimum cash balance of

$125 000. All sales and purchases are made on credit.