2/15, net 45 Change in sales 5% % of customers taking discount 70% Lag factor 2 Cost of capital 0.06 Bad debt, % of sales 0.05 Cost of goods sold, % of sales 0.80 G&A, % of sales 0.11 1. What are total sales? 2. What are the sales to discount takers? 3. 4. 5. What is the present value of daily net sales to discount takers? What is the present value of daily net sales to non-discount takers? What is the daily cost of goods sold? 6. 7. What is the weighted average DSO used in the G&A calculations? What is the present value of daily G&A? 8. What is the NPV with this policy? 9. What was the NPV of the M5 Ind Ass policy? 10. What is the change in NPV between the current policy and this one? 11. Should the firm change its policy? If so, which policy should it implement? Justify your answer. + Practice Problem**** Total sales 2/20, net 40 10,450,000 2/20, net 40 Change in sales 4.5% Sales to discount takers 7,524,000 Discount % 2% Sales to non-discount takers 2,926,000 % of customers taking discount 72% Lag factor 3 Net sales to discount takers 7,373,520 Cost of capital 0.072 Daily sales 20,201.425 Bad debt, % of sales 0.050 Denominator 1.005 Cost of goods sold, % of sales 0.757 PV 20,100.92 G&A, % of sales 0.222 Net sales to non-discount takers 2,779,700.00 net 30 2/20, net 40 Daily sales Denominator PV PV of sales to DT 20,100.92 7,615.616 1.008 7,555.175 PV of G&A Net Change PV of sales to NDT COGS 7,555.18 21,673.01 6,317.98 862.48 (334.89) (1,197.37) Do not change 28.60 1.006 policy because the NPV will be negative COGS 7,910,650.00 Daily COGS 21,673.014 G&A 2,319,900.00 Daily G&A 6,355.89 Weighted avg. DSO Denominator PV of daily G&A 6,317.982