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pharmdwannabe pharmdwannabe
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11 months ago
London Inc. expects to have sales this year of $15 million under its current credit policy. The present terms are net 60; the DSO is 60 days; and the bad debt loss percentage is 5%. Also, London Inc.’s cost of capital is 15%, and its variable costs total 60% of sales. The credit committee proposes to tighten the credit term to net 30. The consultants predict that sales would decrease by $500,000. The new DSO would be 30 days, and the bad debt loss percentage on all sales would fall to 3%. What would be the incremental cost of carrying receivables if this change were made? Assume 360 days in a year.


▸

$157,900



▸

$108,750



▸

–$116,250 (carrying costs would decline)



▸

–$225,000 (carrying costs would decline)

Textbook 
Financial Management: Theory and Practice

Financial Management: Theory and Practice


Edition: 4th
Authors:
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channy40channy40
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11 months ago
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pharmdwannabe Author
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11 months ago
Smart ... Thanks!
gefa
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Yesterday
Helped a lot
KaylenePig
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2 hours ago
Thanks
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