Question 7 0/1 point Belsole Industries sells its products on credit terms of "2/10 net 40. Belsole is considering granting credit to retailers with total assets as low as $500,000, which is below their current minimum asset requirement of $750,000. Belsole believes sales will increase by $7,000,000 from the new credit group, but the ACP is estimated to be 60 days for this new group, as opposed to 35 days for current customers- lf 20% of the new customers will take the discount and 4% of the new revenues will be written off as bad debt, should Be sole lower its credit standards? Assume a variable cost ratio of 70% and a 15% required return on AR. Yes, the net expected benefit is $1,458,392 Yes, the net expected benefit is $2,300,324 Yes, the net expected benefit is $1,619,397 No, the net expected benefit is ($38,246) Question 1 0/1 point The November through February months represent a seasonal slow down for Green's Lawn Care & Services Co. Green's has some winter services, but they do not generate as much revenue as their standard summer services. Because of this seasonal down turn, the firm develops a cash budget in order to plan for possible short falls. Based on historical trends, the firm's economic forecasting staff has provided the information below. All of Green's sales are on a credit basis, and 90% are collected in the month following the sale. The remaining 10% are collected two months after the sale. "Material expenses" are 40% of the current month's sales and are paid in the month incurred. All wages and overhead are also paid in the month incurred. As part of the firm's extension of its services, a monthly payment for new equipment of $300 is required through the end of 2003. In February the firm must repay a $13,000 note. Due to a settlement of a lawsuit, Green's will receive $50,000 at the end of December, resulting in an end cash balance for December of $65,000. The firm's required minimum cash balance is $60,000. The firm has an agreement with a bank; a line of credit allows it to borrow up to $45,000 and it is the firm's policy to repay outstanding balances as soon as excess cash is available. Based on the cash budget you prepare for the months of January through March, will the firm have to increase its line of credit in order to meet its borrowing needs? Estimated Sales Wages Over head (Cash) Month November, 2002 December, 2002 January, 2003 February, 2003 March, 2003 $25,000 27,000 25,000 10,000 $7,000 $3,000 8,000 4,000 7,000 3,000 5,000 2,000 0,000 7,000 No, the firm's maximum borrowing needs are $13,400 No, the firm's maximum borrowing needs are $18,500 No, the firm's maximum borrowing needs are $32,000 Yes, the firm's maximum borrowing needs are $51,350