Honesty Company has been experiencing a decrease in sales for the past three monthssince its competitor opened a shop right in front of Hail's store. To increase its sales, Hailis considering a more liberal credit policy However, by doing so, itexpects that 9% of the new accounts will be uncollectible. Collection costs are5% of new sales, production and selling costs are 78%, and accounts receivableturnover is five times. Assume income taxes of 30% and an increase in sales ofP80,000. No other asset buildup will be required to service the new accounts.What would be Honesty's incremental after-tax returnon investment?

The company gives more credit period to increase the sales but the new credit policy will be cost…

since its competitor opened a shop right in front of Hail's store. To increase its sales, is considering a more liberal credit policy However, by doing so, expects that 9% of the new accounts will be uncollectible. Collection costs 5% of new sales, production and selling costs are 78%, and accounts receiva turnover is five times. Assume income taxes of 30% and an increase in sales P80,000. No other asset buildup will be required to service the new accour What would be Honesty's incremental after-tax return on investme

since its competitor opened a shop right in front of Hail's store. To increase its sales, is considering a more liberal credit policy However, by doing so, expects that 9% of the new accounts will be uncollectible. Collection costs 5% of new sales, production and selling costs are 78%, and accounts receiva turnover is five times. Assume income taxes of 30% and an increase in sales P80,000. No other asset buildup will be required to service the new accour What would be Honesty's incremental after-tax return on investme

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 15P

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On february 5, 2018, nicanor merchandising has purchased goods on account amounting to 500,000 with credit terms of 3/15, n/60 from its major trade supplier. nicanor operates 360 days a year. Required: 3. assuming nicanor did not pay the account within the discount period, how much is the penalty in using the money for the next 45 days? (please answer) 4. in case the prevailing interest rate on bank loan is 20% per annum at simple interest, should nicanor pay within the discount period or not? Breifly discuss your answer and present supporting computation. (please answer) 5. determine the net monetary benefit that nicanor will enjoy in selecting the optimal alternative. (please anwer)
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