In an effort to speed up the collection of receivables, Hill Publishing Company is con-side ring increasing the size of its cash discount by changing its credit terms from ? 1/10, net 30 ? to ? 2/10, net 30. ? Currently, the company?s collection period averages 43 days. Under the new credit terms, it is expected to decline to 28 days. Also, the percentage of customers who will take advantage of the cash discount is expected to increase from the current 50 percent to 70 percent with the new credit terms. Bad-debt losses currently average 4 percent of sales and are not expected to change significantly if Hill changes its credit policy. Annual credit sales are $3.5 million, the variable cost ratio is 60 percent, and the required pretax rate of return (i.e., the opportunity cost) on receivables investment is 14 percent. The company does not expect its inventory level to change as a result of its proposed change in credit terms. Assuming that Hill does decide to increase the size of its cash discount, determine the following:
a. The earnings on the funds released by the change in credit terms
b. The cost of the additional cash discounts taken
c. The net effect on Hill?s pretax profits
This question was answered on: Jan 30, 2021
Buy this answer for only: $15
This attachment is locked
We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free solution (Deadline assured. Flexible pricing. TurnItIn Report provided)
Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
About this QuestionSTATUS
Jan 30, 2021EXPERT
GET INSTANT HELP/h4>
We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.
You can also use these solutions:
- As a reference for in-depth understanding of the subject.
- As a source of ideas / reasoning for your own research (if properly referenced)
- For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
NEW ASSIGNMENT HELP?
Order New Solution. Quick Turnaround
Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.
WE GUARANTEE, THAT YOUR PAPER WILL BE WRITTEN FROM SCRATCH AND WITHIN A DEADLINE.