Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

can you solve the first question using the given info in Q2 and see if my answer is correct in Q2?? one of the questions

can you solve the first question using the given info in Q2 and see if my answer is correct in Q2?? image text in transcribed
image text in transcribed
one of the questions is already answered...can you please answer the other question but using the info given in the question which is already answered?
A company is thinking about changing its credit policy to attract customers away from competitors. The present policy calls for a 1.24/10, net 30 cash discount. The new policy would call for a 3.3/10, net 50 cash discount. Currently, 31% of its customers are taking the discount, and it is anticipated that this number would go up to 63% with the new discount policy. It is further anticipated that annual sales would increase from a level of $306k to $625k as a result of the change in the cash discount policy. The average inventory carried by the firm is based on an EOQ. Assume sales increase from 16k to 22.2K units. The ordering cost for each order is $197 and the carrying cost per unit is $2.88 - these values will not change with the discounach unit in inventory has an average cost of $12. Cost of goods sold equates to 66% of net sales, general and administrative expenses are 19% of net sales, and interest payments of 12% will only be necessary for the increase in the accounts receivable and inventory balances" (see Information below). Taxes will be 37% of before-tax income. Note: The term "k" is used to represent thousands (* $1,000). Required: Calculate the percentage in earnings after taxes (EAT) between the current policy (before the discount) and the new policy (after the discount). A company wishes to use financial futures to hedge its interest rate exposure. The company will sell 10 Treasury futures contracts at $137k per contract. It is Jul and the contracts must be closed out in Dec of this year. Long-term interest rates are currently 13.45%. If they increase to 14.97%, assume the value of the contracts will go down by 6%. Also if interest rates do increase by 1.08%, assume the firm will have additional interest expense on its business loans and other commitments of $52k. This expense will be separate from the futures contracts. Note: The term "k" is used to represent thousands (x $1,000), Required: In percentage terms, what is the net gain (or cost) to the firm once the increased interest expense is accounted for? 2.20 % Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places (for example: 28.31%)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Students also viewed these Accounting questions