Answered step by step
Verified Expert Solution
Question
1 Approved Answer
initiating a cash discount gardener company currently makes all sales on credit and offers no cash discount. The firm is considering offering a 4% cash
initiating a cash discount
gardener company currently makes all sales on credit and offers no cash discount. The firm is considering offering a 4% cash discount for payment within 15 days. The firms current average collection period is 60 days, sales are 40,000 units selling price is $47 per unit and variable cost is $34 per unit. The firm expects that the change in credit terms will result in an increase in sales to 43,000 units, that 70% of sales will take the discount and the average collection period Will fall to 30 days. If the firms required rate of return on equal risk investments is 10% should the discount be offered?
note assume at 365 day year
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started