Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

15 in the 35% able costs average 75% 2- accept ing this proposal. flow spreadsheet. ginal tax bracket, and it has a 11% cost of

image text in transcribed

15 in the 35% able costs average 75% 2- accept ing this proposal. flow spreadsheet. ginal tax bracket, and it has a 11% cost of capital. a. Calculate the incremental cash flows from a b. Organize your cash flows from part a into a cash c. Calculate the proposal's NPV, IRR, and NAB. d. Should the company lengthen its payment terms? $2,500,000 on terms of net 30 and a collection period sales, 14. (Payment date) A company with annual sales of $22,000,000 is considering changing its payment terms from net 40 to net 30 to encourage customers to pay more promptly. The company forecasts that customers would respond by paying on day 30 rather than on day 45 as at present (assume a 360-day year) but would decrease their purchases by $400,000 per year. The company also forecasts that its idle cash bal- ance would decrease by $100,000 and administrative costs would be reduced by $50,000. The company's variable costs average 65% of sales, it is in the 35% marginal tax bracket, and it has a 12% cost of capital. a. Calculate the incremental cash flows from accept b. Organize your cash flows from part a into a cash of 40 days (assume a 360 ing this proposal flow spreadsheet. c. Calculate the proposal's NPV, IRR, and NAB. d. Should the company shorten its payment terms? 15. (Discounts) A company with annual sales of

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Handbook On Corporate Governance In Financial Institutions

Authors: Christine A. Mallin

1st Edition

1784711780, 978-1784711788

More Books

Students also viewed these Finance questions