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BUSI 320 Week 3 homework Assignment 2014

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Question;Assignment Print View1.10/31/14, 4:11 PMaward:1.00 pointBambino Sporting Goods makes baseball gloves that are very popular in the spring and early summerseason. Units sold are anticipated as follows:MarchAprilMayJune4,1508,15013,30011,30036,900If seasonal production is used, it is assumed that inventory will directly match sales for each month andthere will be no inventory buildup.The production manager thinks the preceding assumption is too optimistic and decides to go with levelproduction to avoid being out of merchandise. He will produce the 36,900 units over four months at a levelof 9,225 per month.a. What is the ending inventory at the end of each month? Compare the unit sales to the units producedand keep a running total. (Leave no cells blank - be certain to enter "0" wherever required.)EndingInventoryMarchAprilMayJuneunitsunitsunitsunitsb. If the inventory costs $12 per unit and will be financed at the bank at a cost of 12 percent, what is themonthly financing cost and the total for the four months? (Use 1.0 percent as the monthly rate.) (Leaveno cells blank - be certain to enter "0" wherever required.)MarchAprilMayJuneTotal financing costInventoryFinancing Cost$$View Hint #1Worksheet2.Difficulty: BasicLearning Objective: 06-01 Working capital managementinvolves financing and controlling the current assets of thefirm.award:1.00 pointBiochemical Corp. requires $520,000 in financing over the next three years. The firm can borrow the fundsfor three years at 10.90 percent interest per year. The CEO decides to do a forecast and predicts that if sheutilizes short-term financing instead, she will pay 7.75 percent interest in the first year, 12.50 percentinterest in the second year, and 8.75 percent interest in the third year. Assume interest is paid in full at theend of each year.a. Determine the total interest cost under each plan.Long-term fixed-rateShort-term variable-rateInterest Cost$$b. Which plan is less costly?Long-term fixed-rate planhttp://ezto.mheducation.com/hm.tpxPage 1 of 13Assignment Print View10/31/14, 4:11 PMShort-term variable-rate planView Hint #1Worksheet3.Difficulty: BasicLearning Objective: 06-03 The financing of an asset shouldbe tied to how long the asset is likely to be on the balancesheet.award:1.00 pointSauer Food Company has decided to buy a new computer system with an expected life of three years. Thecost is $430,000. The company can borrow $430,000 for three years at 13 percent annual interest or forone year at 11 percent annual interest. Assume interest is paid in full at the end of each year.a. How much would Sauer Food Company save in interest over the three-year life of the computer systemif the one-year loan is utilized and the loan is rolled over (reborrowed) each year at the same 11 percentrate? Compare this to the 13 percent three-year loan.Interest11 percent loan13 percent loanInterest savings$$$b. What if interest rates on the 11 percent loan go up to 16 percent in year 2 and 19 percent in year 3?What would be the total interest cost compared to the 13 percent, three-year loan?Interest$$$Fixed-rate 13% loanVariable-rate loanAdditional interest costView Hint #1Worksheet4.Difficulty: IntermediateLearning Objective: 06-03 The financing of an asset shouldbe tied to how long the asset is likely to be on the balancesheet.award:2.00 pointsAssume that Hogan Surgical Instruments Co. has $3,300,000 in assets. If it goes with a low-liquidity plan forthe assets, it can earn a return of 16 percent, but with a high-liquidity plan, the return will be 12 percent. Ifthe firm goes with a short-term financing plan, the financing costs on the $3,300,000 will be 8 percent, andwith a long-term financing plan, the financing costs on the $3,300,000 will be 10 percent.a. Compute the anticipated return after financing costs with the most aggressive asset-financing mix.Anticipated return$b. Compute the anticipated return after financing costs with the most conservative asset-financing mix.Anticipated return$c. Compute the anticipated return after financing costs with the two moderate approaches to the assetfinancing mix.Low liquidityHigh liquidityAnticipated Return$$View Hint #1Worksheet5.Difficulty: IntermediateLearning Objective: 06-05 Risk, as well as profitabilitydetermines the financing plan for current assets.award:3.00 pointsAssume that Atlas Sporting Goods Inc. has $1,050,000 in assets. If it goes with a low-liquidity plan for theassets, it can earn a return of 15 percent, but with a high-liquidity plan the return will be 12 percent. If thefirm goes with a short-term financing plan, the financing costs on the $1,050,000 will be 9 percent, and witha long-term financing plan, the financing costs on the $1,050,000 will be 10 percent.a. Compute the anticipated return after financing costs with the most aggressive asset-financing mix.http://ezto.mheducation.com/hm.tpxPage 2 of 13Assignment Print View10/31/14, 4:11 PMAnticipated return$b. Compute the anticipated return after financing costs with the most conservative asset-financing mix.Anticipated return$c. Compute the anticipated return after financing costs with the two moderate approaches to the assetfinancing mix.Low liquidityHigh liquidityd.Anticipated Return$$If the firm used the most aggressive asset-financing mix described in part a and had the anticipatedreturn you computed for part a, what would earnings per share be if the tax rate on the anticipatedreturn was 30 percent and there were 20,000 shares outstanding? (Round your answer to 2 decimalplaces.)Earnings per share$e-1. Now assume the most conservative asset-financing mix described in part b will be utilized. The taxrate will be 30 percent. Also assume there will only be 5,000 shares outstanding. What will earningsper share be? (Round your answer to 2 decimal places.)Earnings per share$e-2. Would the conservative mix have higher or lower earnings per share than the aggressive mix?HigherLowerView Hint #1Worksheet6.Difficulty: IntermediateLearning Objective: 06-05 Risk, as well as profitabilitydetermines the financing plan for current assets.award:2.00 pointsColter Steel has $5,350,000 in assets.Temporary current assetsPermanent current assetsFixed assetsTotal assets$ 2,700,0001,585,0001,065,000$ 5,350,000Short-term rates are 11 percent. Long-term rates are 16 percent. Earnings before interest and taxes are$1,130,000. The tax rate is 30 percent.If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is trueof short-term financing, what will earnings after taxes be?Earnings after taxes$View Hint #1Worksheet7.Difficulty: IntermediateLearning Objective: 06-03 The financing of an asset shouldbe tied to how long the asset is likely to be on the balancesheet.award:2.00 pointsColter Steel has $5,600,000 in assets.Temporary current assetsPermanent current assetsFixed assetsTotal assets$ 3,200,0001,610,000790,000$ 5,600,000Assume the term structure of interest rates becomes inverted, with short-term rates going to 11 percent andlong-term rates 3 percentage points lower than short-term rates. Earnings before interest and taxes are$1,180,000. The tax rate is 20 percent.If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is trueof short-term financing, what will earnings after taxes be?http://ezto.mheducation.com/hm.tpxPage 3 of 13Assignment Print ViewEarnings after taxes10/31/14, 4:11 PM$View Hint #1Worksheet8.Difficulty: IntermediateLearning Objective: 06-04 Long-term financing is usuallymore expensive than short-term financing based on thetheory of the term structure of interest rates.award:2.00 pointsGuardian Inc. is trying to develop an asset-financing plan. The firm has $330,000 in temporary currentassets and $230,000 in permanent current assets. Guardian also has $430,000 in fixed assets. Assume atax rate of 40 percent. (Do not round intermediate calculations. Round your answers to the nearestwhole number.)a. Construct two alternative financing plans for Guardian. One of the plans should be conservative, with 80percent of assets financed by long-term sources, and the other should be aggressive, with only 56.25percent of assets financed by long-term sources. The current interest rate is 12 percent on long-termfunds and 7 percent on short-term financing. Compute the annual interest payments under each plan.ConservativeAggressiveAnnual Interest$$b. Given that Guardians earnings before interest and taxes are $210,000, calculate earnings after taxesfor each of your alternatives.ConservativeAggressiveEarningsAfter Taxes$$c. What would the annual interest and earnings after taxes for the conservative and aggressive strategiesbe if the short-term and long-term interest rates were reversed?Total interestEarnings after taxesConservative$$Aggressive$$View Hint #1Worksheet9.Difficulty: IntermediateLearning Objective: 06-05 Risk, as well as profitabilitydetermines the financing plan for current assets.award:2.00 pointsLear Inc. has $860,000 in current assets, $380,000 of which are considered permanent current assets. Inaddition, the firm has $660,000 invested in fixed assets.a. Lear wishes to finance all fixed assets and half of its permanent current assets with long-term financingcosting 10 percent. The balance will be financed with short-term financing, which currently costs 5percent. Lears earnings before interest and taxes are $260,000. Determine Lears earnings after taxesunder this financing plan. The tax rate is 30 percent.Earnings after taxes$b. As an alternative, Lear might wish to finance all fixed assets and permanent current assets plus half ofits temporary current assets with long-term financing and the balance with short-term financing. Thesame interest rates apply as in part a. Earnings before interest and taxes will be $260,000. What will beLears earnings after taxes? The tax rate is 30 percent.Earnings after taxes$View Hint #1Worksheet10.Difficulty: IntermediateLearning Objective: 06-05 Risk, as well as profitabilitydetermines the financing plan for current assets.award:2.00 pointshttp://ezto.mheducation.com/hm.tpxPage 4 of 13Assignment Print View10/31/14, 4:11 PMCarmens Beauty Salon has estimated monthly financing requirements for the next six months as follows:JanuaryFebruaryMarch$ 10,2004,2005,200AprilMayJune$ 10,20011,2006,200Short-term financing will be utilized for the next six months. Projected annual interest rates are:JanuaryFebruaryMarch6.0 %7.0 %10.0 %AprilMayJune13.0 %12.0 %12.0 %a. Compute total dollar interest payments for the six months. (Round your monthly interest rate to 2decimal places when expressed as a percent. Round your interest payments to the nearestwhole cent.)Total dollar interest payments$b-1. Compute the total dollar interest payments if long-term financing at 12 percent had been utilizedthroughout the six months? (Round your monthly interest rate to 2 decimal places whenexpressed as a percent. Round your interest payments to the nearest whole cent.)Total dollar interest payments$b-2. If long-term financing at 12 percent had been utilized throughout the six months, would the total-dollarinterest payments be larger or smaller than with the short-term financing plan?LargerSmallerView Hint #1Worksheet11.Difficulty: ChallengeLearning Objective: 06-03 The financing of an asset shouldbe tied to how long the asset is likely to be on the balancesheet.award:1.00 pointCarmens Beauty Salon has estimated monthly financing requirements for the next six months as follows:January $ 9,900February3,900March4,900AprilMayJune$ 9,90010,9005,900Short-term financing will be utilized for the next six months. Projected annual interest rates are:JanuaryFebruaryMarch8% April9May12June15%1212What long-term interest rate would represent a break-even point between using short-term financing andlong-term financing? (Round the monthly interest rate to 2 decimal places when expressed as apercent (e.g.,.67%) and use this rounded rate to compute the monthly interest. Round the monthlyinterest to the nearest whole cent. Use the rounded monthly interest amounts to compute the totalinterest for the 6-month period. Input your answer as a percent rounded to 2 decimal places.)Interest rate%View Hint #1Worksheet12.Difficulty: ChallengeLearning Objective: 06-03 The financing of an asset shouldbe tied to how long the asset is likely to be on the balancesheet.award:5.00 pointsBombs Away Video Games Corporation has forecasted the following monthly sales:JanuaryFebruaryMarch$ 112,000105,00037,000http://ezto.mheducation.com/hm.tpxJulyAugustSeptember$57,00057,00067,000Page 5 of 13Assignment Print View10/31/14, 4:11 PMAprilMayJune37,000October97,00032,000 November47,000 DecemberTotal annual sales = $900,000117,000135,000Bombs Away Video Games sells the popular Strafe and Capture video game. It sells for $5 per unit andcosts $2 per unit to produce. A level production policy is followed. Each month's production is equal toannual sales (in units) divided by 12.Of each month's sales, 30 percent are for cash and 70 percent are on account. All accounts receivableare collected in the month after the sale is made.a. Construct a monthly production and inventory schedule in units. Beginning inventory in January is37,000 units.Bombs Away Video Games CorporationProduction and inventory schedule in unitsJanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecemberBeginninginventory+37,000ProductionSalesEndinginventory=b. Prepare a monthly schedule of cash receipts. Sales in December before the planning year are$100,000.January$Bombs Away Video Games CorporationCash Receipts ScheduleFebruaryMarchApril$$$$$Cash receipts:Cash salesPrior month's credit sales$$$$$$Total cash receipts$$$$$$SalesMayJuneSales$Bombs Away Video Games CorporationCash Receipts ScheduleAugustSeptemberOctober$$$Cash receipts:Cash salesPrior month's credit sales$$$$$$Total cash receipts$$$$$$JulyNovember$December$c. Prepare a cash payments schedule for January through December. The production costs of $2 per unitare paid for in the month in which they occur. Other cash payments, besides those for production costs,are $57,000 per month.Production costOther cash paymentsTotal cash paymentshttp://ezto.mheducation.com/hm.tpxJanuary$Bombs Away Video Games CorporationCash Payments ScheduleConstant productionFebruaryMarchApril$$$$$$$$$$$MayJunePage 6 of 13Assignment Print View10/31/14, 4:11 PMProduction costOther cash payments$Bombs Away Video Games CorporationCash Payments ScheduleConstant productionAugustSeptemberOctober$$$Total cash payments$$July$November$$$December$$d. Prepare a monthly cash budget for January through December using the cash receipts schedule frompart b and the cash payments schedule from part c. The beginning cash balance is $5,000, which is alsothe minimum desired. (Leave no cells blank - be certain to enter "0" wherever required. Negativeamounts should be indicated by a minus sign.)January$Bombs Away Video Games CorporationCash BudgetFebruaryMarchApril$$$$$$$$$$$Ending cash balance$$$$$$Cumulative loan balance$$$$$$Beginning cashNet cash flowCumulative cash balanceMayJuneMonthly loan or (repayment)Beginning cashNet cash flow$Bombs Away Video Games CorporationCash BudgetAugustSeptember$$Cumulative cash balanceMonthly loan or (repayment)$$$$$$Ending cash balance$$$$$$Cumulative loan balance$$$$$$JulyOctober$November$December$View Hint #1Worksheet13.Difficulty: ChallengeLearning Objective: 06-03 The financing of an asset shouldbe tied to how long the asset is likely to be on the balancesheet.award:2.00 pointsNeon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neonhas determined that through the establishment of local collection centers around the country, she can speedup the collection of payments by two days. Furthermore, the cash management department of her bank hasindicated to her that she can defer her payments on her accounts by one-half day without affectingsuppliers. The bank has a remote disbursement center in Florida.a. If Neon Light Company has $2.55 million per day in collections and $1.11 million per day indisbursements, how many dollars will the cash management system free up? (Enter your answer indollars not in millions (e.g., $1,234,567).)Freed-up funds$b. If Neon Light Company can earn 7 percent per annum on freed-up funds, how much will the income be?(Enter your answer in dollars not in millions (e.g., $1,234,567).)Interest on freed-up cash$c. If the total cost of the new system is $430,000, should it be implemented?YesNoView Hint #1Learning Objective: 07-02 Cash management involveshttp://ezto.mheducation.com/hm.tpxPage 7 of 13Assignment Print View10/31/14, 4:11 PMWorksheet14.Difficulty: Basiccontrol over the receipt and payment of cash so as tominimize nonearning cash balances.award:1.00 pointMervyns Fine Fashions has an average collection period of 35 days. The accounts receivable balance is$70,000.What is the value of its annual credit sales? (Use a 360-day year.)Annual credit sales$View Hint #1Worksheet15.Difficulty: Basicaward:2.00 pointsRoute Canal Shipping Company has the following schedule for aging of accounts receivable:(1)Month ofSalesAprilMarchFebruaryJanuaryAge of ReceivablesApril 30, 2013(2)(3)Age ofAccount Amounts030 $ 110,110316062,920619094,3809112047,190Total receivables$314,600(4)Percent ofAmount Due____________________________100%a. Calculate the percentage of amount due for each month.Month of SalesAprilMarchFebruaryPercent of Amount Due%%%JanuaryTotal receivables%100 %b. If the firm had $1,452,000 in credit sales over the four-month period, compute the average collectionperiod. Average daily sales should be based on a 120-day period.Average collection perioddaysc. If the firm likes to see its bills collected in 31 days, should it be satisfied with the average collectionperiod?YesNod. Disregarding your answer to part c and considering the aging schedule for accounts receivable, shouldthe company be satisfied?YesNoView Hint #1Worksheet16.Difficulty: Intermediateaward:2.00 pointsFisk Corporation is trying to improve its inventory control system and has installed an online computer at itsretail stores. Fisk anticipates sales of 37,500 units per year, an ordering cost of $12 per order, and carryingcosts of $1.60 per unit.a. What is the economic ordering quantity?http://ezto.mheducation.com/hm.tpxPage 8 of 13Assignment Print View10/31/14, 4:11 PMEconomic ordering quantityunitsb. How many orders will be placed during the year?Number of ordersordersc. What will the average inventory be?Average inventoryunitsd. What is the total cost of ordering and carrying inventory?Total cost$View Hint #1Worksheet17.Difficulty: IntermediateLearning Objective: 07-05 Inventory management requiresdetermining the level of inventory necessary to enhancesales and profitability.award:2.00 pointsDiagnostic Supplies has expected sales of 162,000 units per year, carrying costs of $2 per unit, and anordering cost of $5 per order.a. What is the economic ordering quantity?Economic ordering quantityunitsb-1. What is the average inventory?Average inventoryunitsb-2. What is the total carrying cost?Total carrying cost$Assume an additional 100 units of inventory will be required as safety stock.c-1. What will the new average inventory be?Average inventoryunitsc-2. What will the new total carrying cost be?Total carrying cost$View Hint #1Worksheet18.Difficulty: IntermediateLearning Objective: 07-05 Inventory management requiresdetermining the level of inventory necessary to enhancesales and profitability.award:2.00 pointsWisconsin Snowmobile Corp. is considering a switch to level production. Cost efficiencies would occurunder level production, and aftertax costs would decline by $44,800, but inventory would increase by$320,000. Wisconsin Snowmobile would have to finance the extra inventory at a cost of 15.5 percent.a-1. Determine the extra cost or savings of switching over to level production. (Input the amount as apositive value.)(Click to select)$a-2. Should the company go ahead and switch to level production?YesNob. How low would interest rates need to fall before level production would be feasible? (Input youranswer as a percent rounded to the nearest whole number.)http://ezto.mheducation.com/hm.tpxPage 9 of 13Assignment Print View10/31/14, 4:11 PMInterest rate%View Hint #1Worksheet19.Difficulty: IntermediateLearning Objective: 07-05 Inventory management requiresdetermining the level of inventory necessary to enhancesales and profitability.award:2.00 pointsJohnson Electronics is considering extending trade credit to some customers previously considered poorrisks. Sales would increase by $210,000 if credit is extended to these new customers. Of the new accountsreceivable generated, 9 percent will prove to be uncollectible. Additional collection costs will be 4 percent ofsales, and production and selling costs will be 80 percent of sales. The firm is in the 10 percent tax bracket.a. Compute the incremental income after taxes.Incremental income after taxes$b. What will Johnsons incremental return on sales be if these new credit customers are accepted? (Inputyour answer as a percent rounded to 2 decimal places.)Incremental return on sales%c. If the accounts receivable turnover ratio is 7 to 1, and no other asset buildup is needed to serve the newcustomers, what will Johnsons incremental return on new average investment be? (Do not roundintermediate calculations. Input your answer as a percent rounded to 2 decimal places.)Incremental return on new average investment%View Hint #1Worksheet20.Difficulty: Intermediateaward:2.00 pointsHenderson Office Supply is considering a more liberal credit policy to increase sales, but expects that 8percent of the new accounts will be uncollectible. Collection costs are 6 percent of new sales, productionand selling costs are 79 percent, and the accounts receivable turnover is four times. Assume income taxesof 35 percent and an increase in sales of $70,000. No other asset buildup will be required to service thenew accounts.a. What additional investment in accounts receivable is needed to support this sales expansion?Incremental accounts receivable$b. What would be Hendersons incremental aftertax return on investment? (Input your answer as apercent rounded to 2 decimal places.)Return on incremental investment%c. Should Henderson liberalize credit if a 14 percent aftertax return on investment is required?YesNoAssume that Henderson also needs to increase its level of inventory to support new sales and thatthe inventory turnover is four times.d. What would be the total incremental investment in accounts receivable and inventory needed to supporta $70,000 increase in sales?Total incremental investment$e. Given the income determined in part b and the investment determined in part d, should Hendersonextend more liberal credit terms?YesNoView Hint #1Worksheethttp://ezto.mheducation.com/hm.tpxDifficulty: ChallengeLearning Objective: 07-05 Inventory management requiresdetermining the level of inventory necessary to enhancesales and profitability.Page 10 of 13Assignment Print View21.10/31/14, 4:11 PMaward:3.00 pointsFast Turnstiles Co. is evaluating the extension of credit to a new group of customers. Although thesecustomers will provide $414,000 in additional credit sales, 8 percent are likely to be uncollectible. Thecompany will also incur $17,400 in additional collection expense. Production and marketing costs represent76 percent of sales. The firm is in a 35 percent tax bracket and has a receivables turnover of five times. Noother asset buildup will be required to service the new customers. The firm has a 10 percent desired return.a-1. Calculate the incremental income after taxes.Incremental income after taxes$a-2. Calculate the return on incremental investment. (Input your answer as a percent rounded to 2decimal places.)Return on incremental investment%a-3. Should Fast Turnstiles Co. extend credit to these customers?YesNob-1. Calculate the incremental income after taxes if 11 percent of the new sales prove to be uncollectible.Incremental income after taxes$b-2. Calculate the return on incremental investment if 11 percent of the new sales prove to be uncollectible.(Input your answer as a percent rounded to 2 decimal places.)Return on incremental investment%b-3. Should credit be extended if 11 percent of the new sales prove uncollectible?YesNoc-1. Calculate the return on incremental investment if the receivables turnover drops to 1.6, and 8 percentof the accounts are uncollectible. (Input your answer as a percent rounded to 2 decimal places.)Return on incremental investment%c-2. Should credit be extended if the receivables turnover drops to 1.6, and 8 percent of the accounts areuncollectible?NoYesView Hint #1Worksheet22.Difficulty: Challengeaward:4.00 pointsGlobal Services is considering a promotional campaign that will increase annual credit sales by $530,000.The company will require investments in accounts receivable, inventory, and plant and equipment. Theturnover for each is as follows:Accounts receivableInventoryPlant and equipment2 times5 times1 timeAll $530,000 of the sales will be collectible. However, collection costs will be 4 percent of sales, andproduction and selling costs will be 70 percent of sales. The cost to carry inventory will be 5 percent ofinventory. Depreciation expense on plant and equipment will be 10 percent of plant and equipment. The taxrate is 30 percent.a. Compute the investments in accounts receivable, inventory, and plant and equipment based on theturnover ratios. Add the three together.Accounts receivableInventoryPlant and equipment$Total Investment$http://ezto.mheducation.com/hm.tpxPage 11 of 13Assignment Print View10/31/14, 4:11 PMb. Compute the accounts receivable collection costs and production and selling costs and then add thetwo figures together.Collection costProduction and selling costsTotal collection, production, and selling costsc.$$Compute the costs of carrying inventory.Cost of carrying inventory$d. Compute the depreciation expense on new plant and equipment.Depreciation expense$e. Compute the total of all costs from parts b through d.Total costs$f. Compute income after taxes.Income after taxes$g-1. What is the aftertax rate of return? (Input your answer as a percent rounded to 2 decimal places.)Aftertax rate of return%g-2. If the firm has a required return on investment of 8 percent, should it undertake the promotionalcampaign described throughout this problem?NoYesView Hint #1Worksheet23.Difficulty: Challengeaward:3.00 pointsDome Metals has credit sales of $270,000 yearly with credit terms of net 90 days, which is also the averagecollection period. Dome does not offer a discount for early payment, so its customers take the full 90 daysto pay.a. What is the average receivables balance? (Use a 360-day year.)Average receivables balance$b. What is the receivables turnover? (Use a 360-day year.)Receivables turnovertimesView Hint #1Worksheet24.Difficulty: Challengeaward:1.00 pointDome Metals has credit sales of $216,000 yearly with credit terms of net 45 days, which is also the averagecollection period. Assume the firm adopts new credit terms of 2/15, net 45 and all customers pay on the lastday of the discount period. Any reduction in accounts receivable will be used to reduce the firm's bank loanwhich costs 9 percent. The new credit terms will increase sales by 10 percent because the discount willmake the firm's price competitive.a. If Dome earns 20 percent on sales before discounts, what will be the net change in income if the newcredit terms are adopted? (Use a 360-day year.)Net change in income$b. Should the firm offer the discount?NoYes

 

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