McEwan Industries sells on terms of 3/10, net 25. Total sales for the year are $880,500; 40% of the customers pay on the 10 day and take discounts while the other 60% pay, on average, 64 days after their purchases. Assume 365 days in year for your calculations. a. What is the days sales outstanding? Round your answer to two decimal places days b. What is the average amount of receivables? Round your answer to the nearest cent. Do not round intermediate calculations. c. What is the percentage cost of trade credit to customers who take the discount? Round your answers to two decimal places. d. What is the percentage cost of trade credit to customers who do not take the discount and pay in 64 days? Round your answers to two decimal places. Do not round Intermediate calculations. Nominal cost: Effective cost: e. What would happen to McEwan's accounts receivable if it toughened up on its collection policy with the result that all nondiscount customers pald on the 25 day? Round your answers to two decimal places. Do not round intermediate calculations Days sales outstanding (DSO) days Average receivables - $ CURRENT ASSETS INVESTMENT POLICY Rentz Corporation is investigating the optimal level of current assets for the coming year. Management expects sales to increase to approximately $3 million as a result of an asset expansion presently being undertaken. Fixed assets total $1 million, and the firm plans to maintain a 45% debt-to-assets ratio. Rentz's interest rate is currently 5% on both short-term and long-term debt (which the firm uses in its permanent structure). Three alternatives regarding the projected current assets level are under consideration: (1) a restricted policy where current assets would be only 45% of projected sales, (2) a moderate policy where current assets would be 50% of sales, and (3) a relaxed policy where current assets would be 60% of sales. Earnings before interest and taxes should be 11% of total sales, and the federal-plus-state tax rate is 40%. a. What is the expected return on equity under each current assets level? Round your answers to two decimal places Restricted policy Moderate policy Relaxed policy b. In this problem, we assume that expected sales are independent of the current assets investment policy. Is this a valid assumption? 1. Yes, the current asset policies followed by the firm mainly influence the level of fixed assets. II. No, this assumption would probably not be valid in a real world situation. A firm's current asset policies may have a significant effect on sales III. Yes, this assumption would probably be valid in a real world situation. A firm's current asset policies have no significant effect on sales. IV. Yes, sales are controlled only by the degree of marketing effort the firm uses, irrespective of the current asset policies it employs. V. Yes, the current asset policies followed by the firm mainly influence the level of long-term debt used by the firm Select c. How would the firm's risk be affected by the different policies? The input in the box below will not be graded, but may be reviewed and considered by your instructor