Question
In: Finance
Reese Brothers Publishers Inc (RBP) expects to have sales this year of $15 million under its...
Reese Brothers Publishers Inc (RBP) expects to have sales this year of $15 million under its current credit policy. The present terms are net 30; the days sales outstanding (DSO) is 60 days; and the bad debt loss percentage is 5 percent. Since RBP wants to improve its profitability, the treasurer has proposed that the credit period be shortened to 15 days. This change would reduce expected sales by $500,000, but it would also shorten the DSO on the remaining sales to 30 days. Expected bad debt losses on the remaining sales would fall to 3 percent. The variable cost percentage is 60 percent, and the cost of capital is 15 percent. What are the incremental pre-tax profits from this proposal?
|
$181,250 |
||
|
$271,750 |
||
|
$256,250 |
||
|
$206,500 |
||
|
$231,250 |
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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Bruin Inc. will have earnings of $15 million next year and is projected to grow at...
Bruin Inc. will have earnings of $15 million next year and is
projected to grow at a constant rate of 6 percent forever. All
earnings are paid out as dividends to shareholders.
The company plans to launch a new project three years from now
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What is the market value of...
Bruin Inc. will have earnings of $15 million next year and is projected to grow at...
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