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Chapter 3: 3BP (page 249)
Simmons Corp. can borrow from its bank at 17 percent to take a cash discount. The terms of the cash discount are 1.5/10, net 45. Should the firm borrow the funds?
The firm should not borrow the funds.
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Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by three days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida.
b. If Neon Light Company can earn 6 percent per annum on freed-up funds, how much will the income be?
Discuss the relative volatility of short- and long-term interest rates
Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by three days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida.
c. If the total cost of the new system is $400,000, should it be implemented?
Route Canal Shipping Company has the following schedule for aging of accounts receivable:
b. If the firm had $1,500,000 in credit sales over the four-month period, compute the average collection period. Average daily sales should be based on a 120-day period.
What are the 5 Cs of credit that are sometimes used by bankers and others to determine whether a potential loan will be repaid?
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