a) Based on a days sales outstanding of 12, select the closest 30-day increment to that result (30, 60, 90 or 120 days).Assume your firm sells on terms of 3/20, net closest increment. Example: Days sales outstanding = 55 days, then the closest is 60 days and your terms are 3/20 net 60.

Find the APR and effective rate on the cost of trade credit.

b) Your firm discovers that one of their large customers, Shad Services, does not pay until day 100 days after your net date.This is causing the days sales outstanding to appear larger than it is.What is the effective cost of trade credit for Shad?

c) You want to make Shad pay earlier.What can you do to make that happen?What are the risks?

Additional Information: Sales are $20 million for the most recent year. Cost of goods sold are $10 million. Inventory is $ 1 million Gross margin is 15%. EBIT is 2 million. Tax Rate is 35%. Working Capital is $1 million. Total Assets are $25 million. Retained Earnings are $6 million. Total Liabilities are $25 million.

Additional market information: Debt Rate- 3.55%, Beta- .8, Market Cap- 15 million, Stock Price - $23, T-bond - .50.