FCF 9th edition Chapter 20

FCF 9th edition Chapter 20 - c Cost of credit report $1.50...

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Chapter 20 Question 16 Input Area: Sales 500 Cost per unit $490 Probablity of default 4% Initial charge to subscribe $450 Cost of each credit report $5.00 Output Area: Cost of subscription $2,950.00 Savings from credit reports $9,800.00 Net savings $6,850.00 The shop should subscribe to the credit agency.
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Chapter 20 - Appendix Question 4 Input Area: Net 90 Required return per month 0.75% Refuse Credit Grant Credit Price per unit $71 $75 Cost per unit $32 $33 Quantity sold per quarter 6,200 6,900 Probability of payment 1.0 0.9
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Unformatted text preview: c. Cost of credit report $1.50 Output Area: a. Cash discount 5.33% Default probability 10.00% Since the default probability is greater than the cash discount, credit should not be granted. b. Due to the increase in both quantity sold and credit price when credit is granted, an additional incremental cost is incurred. Additional incremental cost $29,300 Breakeven credit price $77.32 c. NPV $(74,622.27) The reports should not be purchased and credit should not be granted....
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FCF 9th edition Chapter 20 - c Cost of credit report $1.50...

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