PART B ONLY! PLEASE SHOW IN EXCEL FORMULAS.

PART B ONLY! PLEASE SHOW IN EXCEL FORMULAS

2. ABC Maintenance Service A. ABC FBO sells maintenance services to various private jet operators. For these,it demands payment within 30 days. It is considering changing this policy to 0.66%/7, net 30. What is the implicit annual rate in the new policy? Use a notional purchase of $10,000. B. ABC's maintenance service business grosses some $22M per year before discounts and its average days receivable is 30. If 15% of its clients opt to follow the new policy, whatwill be the change in receivables? If ABC's WACC is 7.0%, what are the projected savingsof the new policy? If its gross margin is 22%, by how much will gross dollar revenues haveto rise to offset the loss from discounts? In percent? D E B) Average Collection Period Gross revenue A B A) Effective Annual Rate (EAR) 2 3 Notional purchase 4 Discount (%) 5 Days difference 6 7 Discount (3) 8 Rate (%) 9 Days difference in 1 year 10 11 EAR 12 13 14 Avg. receivables before new policy % paying early Avg. receivables after new policy Change in receivables Cost of capital Projected savings in capital costs minus: discounts Projected savings net of discounts Gross margin Gross revenues must rise by: - in dollars percent - in 15 16