Microsoft Word - Tutorial 10 questions.docx

Hi! I have three questions on finance that I would like some detailed answers and explanations. I really appreciate your help.

1. A Firm offers terms of 1/10, net 35. 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:

1. a.This discount is changed to 2%.
2. b.The credit period is increased to 60 days.
3. c.Thediscountperiodisincreasedto15days.

2.

Microsoft Word - Tutorial 10 questions.docx

The Harrington Corporation is considering a change in its cash-only policy. The new terms would be net one period. Based on the following information, determine if Harrington should proceed or not. The required return is 2.5 percent per period.

	Current Policy	New Policy
Price per unit	$91	$94
Cost per unit	$47	$47
Unit sales per month	3,850	3,940

3.

Microsoft Word - Tutorial 10 questions.docx

1. For Qn #2, what is the break-even quantity for the new credit policy?
2. For Qn #2, what is the break-even price per unit that should be charged under the new credit policy assuming that the sales figure under the new policy is 4,100 units and all other values remain the same?