1. Lett's commercial paper is presently selling at a discount. It sells for 97.39 of par and matures in 100 days. (Use 365 days a year. Do not round intermediate calculations. Round the final answers to 2 decimal places.) a. Calculate its yield as quoted in the market. Yield b. Calculate its effective annual yield. Effective annual yield 9 2. Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $230,000 if credit is extended to these new customers. Of the new accounts receivable generated, 5 percent will prove to be uncollectible. Additional collection costs will be 2 percent of sales, and production and selling costs will be 71 percent of sales. a. Compute the incremental income before taxes. Incremental income before taxes b. What will the firm's incremental return on sales be if these new credit customers are accepted? (Round the final answer to 2 decimal place.) Incremental return on sales c. If the receivable turnover ratio is 3 to 1, and no other asset buildup is needed to serve the new customers, what will Johnson Electronics'incremental return on new average investment be? (Do round intermediate calculations. Round the final answer to the nearest whole percentage.) Incremental return on new average investment 3.1 Aurora Electrical Company of Yellowknife ships wind turbines throughout the country. Mr. Beam, the financial manager, has determined that through the establishment of local collection centres around the country, he can speed up the collection of payments by two days. Furthermore, the cash management department of the company's bank has indicated to him that he can defer payments on his accounts by one day without offending suppliers. The bank has a remote disbursement centre in New Brunswick. a. If Aurora Electrical Company has $245 million per day in collections and $109 million per day in disbursements, how many dollars will the cash management system free up? (Enter the answer in dollars not in millions.) Freed-up funds b. ITA f Aurora Electrical Company can earn 7% percent per annum on freed-up funds, how much income can be generated? (Enter the answer in dollars not in millions.) Interest on freed-up cash c. If the total cost of the system is $420,000 should it be implemented? No Yes