Question Details

61. Today, October 12, Nadine's Fashions purchased $511 worth of merchandise from a supplier. The credit terms are 1/5, net 20. By what day does Nadine's have to make the payment to receive the discount? Note: October has 31 days. 
A. October 13
B. October 15
C. October 17
D. October 27
E. November 1

62. A supplier grants your firm credit terms of 2/10, net 40. What is the effective annual rate of the discount if the firm purchases $4,600 worth of merchandise? 
A. 27.24 percent
B. 27.86 percent
C. 28.80 percent
D. 29.03 percent
E. 29.27 percent

63. Cape May Products currently sells 650 units a month at a price of $59 a unit. The firm believes it can increase its sales by an additional 125 units if it switches to a net 30 credit policy. The monthly interest rate is 0.35 percent and the variable cost per unit is $38. What is the incremental cash inflow from the proposed credit policy switch? 
A. $774
B. $2,625
C. $4,750
D. $5,690
E. $7,375

64. Polly's Home Accents currently sells 345 units a month at a price of $59 a unit. Polly thinks she can increase her sales by an additional 55 units if she switches to a net 30 credit policy. The monthly interest rate is 0.4 percent and the variable cost per unit is $32. What is the net present value of the proposed credit policy switch? 
A. $349,135
B. $350,895
C. $426,507
D. $621,929
E. $821,135

65. Currently, Glasgow Importers sells 280 units a month at a price of $729 a unit. The firm believes it can increase its sales by an additional 40 units if it switches to a net 30 credit policy. The monthly interest rate is 0.5 percent and the variable cost per unit is $480. What is the net present value of the proposed credit policy switch? 
A. -$213,360
B. -$9,240
C. $190,200
D. $1,287,520
E. $1,768,680

66. Currently, The Toy Box sells 465 units a month at an average price of $39 a unit. The company thinks it can increase sales by an additional 130 units a month if it switches to a net 30 credit policy. The monthly interest rate is 0.4 percent and the variable cost per unit is $21. What is the incremental cash inflow of the proposed credit policy switch? 
A. $2,120
B. $2,340
C. $2,200
D. $2,730
E. $5,070

67. Preston Milled Products currently sells a product with a variable cost per unit of $21 and a unit selling price of $40. At the present time, the firm only sells on a cash basis with monthly sales of 2,800 units. The monthly interest rate is 0.5 percent. What is the switch break-even point if the firm switched to a net 30 credit policy? Assume the selling price per unit and the variable costs per unit remain constant. 
A. 2,830 units
B. 2,910 units
C. 3,333 units
D. 3,414 units
E. 3,526 units

68. Saucier & Co. currently sells 2,200 units a month for total monthly sales of $86,500. The company is considering replacing its current cash only credit policy with a net 30 policy. The variable cost per unit is $18 and the monthly interest rate is 1.2 percent. What is the switch break-even level of sales? Assume the selling price per unit and the variable costs per unit remain constant. 
A. 1,943 units
B. 2,117 units
C. 2,249 units
D. 2,406 units
E. 2,548 units

69. The Cellar Door currently sells 9,620 units a month for total monthly sales of $316,000. The company is considering replacing its current cash only credit policy with a net 30 policy. The variable cost per unit is $15 and the monthly interest rate is 1.5 percent. What is the switch break-even level of sales? 
A. 9,711 units
B. 9,779 units
C. 9,814 units
D. 9,957 units
E. 9,889 units

70. You have the opportunity to make a one-time sale if you will give a new customer 30 days to pay. You suspect there is a 15 percent chance this person will never pay you. The sales price of the item the customer wants to buy is $289. Your variable cost on that item is $156 and your monthly interest rate is 1.75 percent. Should you grant credit to this customer? Why or why not? 
A. yes; because the NPV of the potential sale is $113.05
B. yes; because the NPV of the potential sale is $85.43
C. no; because the NPV of the potential sale is -$133.00
D. no; because the NPV of the potential sale is -113.05
E. no; because the NPV of the potential sale is -$89.65

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