Question
XYZ Company manufactures dashboard components for electric vehicles. The company uses a revolving loan from RBC to finance manufacturing costs at 12.04% annually. Sales of
XYZ Company manufactures dashboard components for electric vehicles. The company uses a revolving loan from RBC to finance manufacturing costs at 12.04% annually. Sales of components are pretty consistent year-round, and units are made to order. Since XYZ Company works exclusively with start-up manufacturers, it is considering extending credit terms from 30 to 45 days. The CFO believes the longer credit terms will increase sales by 23.354% - current sales are $4.71 million. Required: Calculate the additional annual financing cost of this change in credit terms.
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