FINC620 – Davenport – Quiz 5 100% CORRECT SOLUTION
1. Photo voltaic Engines manufactures photo voltaic engines for tractor-trailers. Given the gasoline financial savings out there, new orders for 105 models have been made by clients requesting credit score. The variable value is $eight,400 per unit, and the credit score value is $10,250 every. Credit score is prolonged for one interval. The required return is 1.2 p.c per interval. If Photo voltaic Engines extends credit score, it expects that 20 p.c of the purchasers can be repeat clients and place the identical order each interval perpetually, and the remaining clients will place one-time orders. Calculate the NPV of the choice to grant credit score.(Don't spherical intermediate calculations and spherical your remaining reply to 2 decimal locations. (e.g., 32.16)) 2. Tidwell, Inc., has weekly credit score gross sales of $18,500, and the typical assortment interval is 52 days. The price of manufacturing is 75 p.c of the promoting value. What's the common accounts receivable determine?(Don't spherical intermediate calculations and spherical your remaining reply to 2 decimal locations. (e.g., 32.16)) three. The Harrington Company is contemplating a change in its cash-only coverage. The new phrases can be web one interval. The required return is 2.zero p.c per interval. Present Coverage New Coverage Worth per unit $ 62 $ 64 Price per unit $ 34 $ 34 Unit gross sales monthly 2,600 ? What's the break-even amount for the brand new credit score coverage?(Don't spherical intermediate calculations and spherical your remaining reply to 2 decimal locations. (e.g., 32.16)) four. Air Spares is a wholesaler that shares engine elements and take a look at tools for the business plane trade. A brand new buyer has positioned an order for eight high-bypass turbine engines, which enhance gasoline financial system. The variable value is $1.7 million per unit, and the credit score value is $2.055 million every. Credit score is prolonged for one interval, and primarily based on historic expertise, cost for about 1 out of each 125 such orders isn't collected. The required return is 2.zero p.c per interval. a-1. What's the NPV per engine bought on credit score? (Enter your reply in , not tens of millions of , i.e. 1,234,567. Don't spherical intermediate calculations and spherical your remaining reply to 2 decimal locations. (e.g., 32.16)) a-2. Assuming that this can be a one-time order, ought to it's crammed? The shopper won't purchase if credit score shouldn't be prolonged. b. What's the break-even chance of default partly (a)? (Don't spherical intermediate calculations and spherical your remaining reply to 2 decimal locations. (e.g., 32.16)) c-1. Suppose that clients who don’t default change into repeat clients and place the identical order each interval perpetually. Additional assume that repeat clients by no means default. What's the NPV per engine bought on credit score? (Enter your reply in , not tens of millions of , i.e. 1,234,567. Don't spherical intermediate calculations and spherical your remaining reply to 2 decimal locations. (e.g., 32.16)) c-2. Assuming the client turns into a repeat buyer, what's the break-even chance of default?(Don't spherical intermediate calculations and spherical your remaining reply to 2 decimal locations. (e.g., 32.16)) 5. Bell Tolls, Inc., has a median assortment interval of 58 days. Its common every day funding in receivables is $91,100. What's the receivables turnover?(Use 365 days a yr. Don't spherical intermediate calculations and spherical your remaining reply to four decimal locations. (e.g., 32.1616)) What are annual credit score gross sales?(Use 365 days a yr. Don't spherical intermediate calculations and spherical your remaining reply to 2 decimal locations. (e.g., 32.16))