5. Terms of Sale. A firm offers terms of 1/10, net 30. What effective annual interest rate does the firm earn when a customer does not take the discount? Without doing any calculations, explain what will happen to this effective rate if:

a) The discount is changed to 2 percent.

b) The credit period is increased to 45 days.

c) The discount period is increased to 14 days.

6. ACP and Receivables Turnover. Starset, Inc., has an average collection period of 27 days. Its average daily investment in receivables is $46,300. What are annual credit sales? What is the receivables turnover? Assume 365 days per year.

8. Size of Accounts Receivable. The Arizona Bay Corporation sells on credit terms of net 30. Its accounts are, on average, five days past due. If annual credit sales are $8.35 million, what is the companys balance sheet amount in accounts receivable?

10. Credit Policy Evaluation. Sanchez, Inc., is considering a change in its cash-only sales policy. The new terms of sale would be net one month. Based on the following information, determine if the company should proceed or not. Describe the buildup of receivables in this case. The required return is .95 percent per month.