VC /X Homework on Chapters 5-7 [OX = 125000 1. Zeta Corp. has 12,500 custom relays in its inventory. The variable cost of producing the relays is $125,000. The firm would like to sell the relays quickly or else it would have to raise funds at 15% annu cost to keep its operating cycle going. It has two options to sell the relays. It can sell the relays for $12 each to a wholesalet on cash terms. Alternatively, t an sell the relays to buyerywith somewhate suspect credit for $13 each on terms of 1/10, net 30. The following table contains probability estimates of payments, based on the buyer's past record. Probability 10% Payment 10 30 45 60 75 Invoice amount less 1% discount ILo S Invoice amount 1Le2 500 33% of invoice amount- 33% of invoice amount 34% of invoice amount 52 10% 30% 25 20% Conduct an analysis and recommend the course of action. 2. e-Five Corp. does not presently offer a cash discount and sells on net 30 terms. However, the firm would like to offer a cash discount for payments made on day 10 to retain its customers as many of the firm's competitors have begun to sell on terms of 1.5/10, net 30. Assuming the firm's cost of funds is 17%, what is the maximum cash discount the firm can offer? what is the minimum? (Assume no change in sales) 3. Now assume you are buying from e-Five on terms of 1.5/10, net 30. Would you take the offered discount if your cost of funds was 15%7