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In: Finance
Tennindo, Inc. is starting up its new, cost-efficient gaming system console, the yuu. Tennindo currently has...
Tennindo, Inc. is starting up its new, cost-efficient gaming system console, the yuu. Tennindo currently has 3 comma 500 cash-paying customers and makes a profit of $60 per unit. Tennindo wants to expand its customer base by allowing customers to buy on credit. It estimates that credit sales will bring in an additional 1 comma 000 customers per year, but that there will also be a default rate on credit sales of 5%. It costs $250 to make a yuu, which retails for $310. If all customers (old and new) buy on credit, what is the cost of bad debt without credit screening? What is the most Tennindo would pay for credit screening that accurately identifies bad-debt customers prior to the sale? What are the increased profits from adding credit sales for customers with and without credit screening? Should Tennindo offer credit sales if credit screening costs $10 per customer?
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jeff jeffy answered 1 year agoRelated Solutions
Tennindo, Inc. is starting up its new, cost-efficient gaming system console, the yuu. Tennindo currently has...
Tennindo, Inc. is starting up its new, cost-efficient gaming
system console, the yuu. Tennindo currently has 5, 000
cash-paying customers and makes a profit of $40 per unit.
Tennindo wants to expand its customer base by allowing customers to
buy on credit. It estimates that credit sales will bring in an
additional 1,400 customers per year, but that there will also be a
default rate on credit sales of 5%. It costs $230 to make a yuu,
which retails for...
A) Dog Up! Franks is looking at a new sausage system with an installed cost of...
A) Dog Up! Franks is looking at a new sausage system with an
installed cost of $506559. This cost will be depreciated
straight-line to zero over the project's five-year life, at the end
of which the sausage system can be scrapped for $73471. The sausage
system will save the firm $175487 per year in pretax operating
costs, and the system requires an initial investment in net working
capital of $30680. If the tax rate is 38 percent and the discount...
Lewis Health System Inc. has decided to acquire a new electronic health record system for its...
Lewis Health System Inc. has decided to acquire a new electronic
health record system for its Richmond hospital. The system receives
clinical data and other patient information from nursing units and
other patient care areas, then either displays the information on a
screen or stores it for later retrieval by physicians. The system
also permits patients to call up their health record on Lewis's
website. The equipment costs $1,000,000, and, if it were purchased,
Lewis could obtain a term loan...
Lewis Health System Inc. has decided to acquire a new electronic health record system for its...
Lewis Health System Inc. has decided to acquire a new electronic
health record system for its Richmond hospital. The system receives
clinical data and other patient information from nursing units and
other patient care areas, then either displays the information on a
screen or stores it for later retrieval by physicians. The system
also permits patients to call up their health record on Lewis's
website.
The equipment costs $1,000,000, and, if it were purchased, Lewis
could obtain a term loan...
Lewis Health System Inc. has decided to acquire a new electronic health record system for its...
Lewis Health System Inc. has decided to acquire a new electronic
health record system for its Richmond hospital. The system receives
clinical data and other patient information from nursing units and
other patient care areas, then either displays the information on a
screen or stores it for later retrieval by physicians. The system
also permits patients to call up their health record on Lewis's
website. The equipment costs $1,000,000, and, if it were purchased,
Lewis could obtain a term loan...
Lewis Health System Inc. has decided to acquire a new electronic health record system for its...
Lewis Health System Inc. has decided to acquire a new electronic
health record system for its Richmond hospital. The system receives
clinical data and other patient information from nursing units and
other patient care areas, then either displays the information on a
screen or stores it for later retrieval by physicians. The system
also permits patients to call up their health record on Lewis's
website. The equipment costs $1,000,000, and, if it were purchased,
Lewis could obtain a term loan...
Windsor, Inc. is currently an all-equity financed firm, and its cost of equity is 12%. It has...
Windsor, Inc. is currently an all-equity financed firm, and its
cost of equity is 12%. It has 20,000 shares outstanding
that sell for $25 each. The firm contemplates a restructuring that
would borrow $100,000 in perpetual debt at an interest rate of 8%
which will be used to repurchase stock. Assume that the corporate
tax rate is 35%.
(1) Calculate the present value of the interest tax shields and
the value of the firm after the proposed restructuring.
(2) What will...
The SAI Inc. is planning to set up a new store. The startup cost of the...
The SAI Inc. is planning to set up a new store. The startup cost
of the store is $650,000. The store will increase revenue by
$270,000 each year for the next six years and all costs including
costs of merchandise, labor, utilities, and taxes are $130,000 per
year. The store will require upgrade to the store front every two
years at a cost of $35,000 each time. At the end of the six years,
the store inventory will be sold...
Dog Up! Franks is looking at a new sausage system with an installed cost of $900...
Dog Up! Franks is looking at a new sausage system with an
installed cost of $900 which will be fully depreciated
straight-line over the project's 3-year life and then scrapped for
$150. The system will save the firm $280/year in pretax operating
costs, and the system requires an initial investment in a constant
level of net working capital of $65. If the tax rate is 21% and the
discount rate is 9%, what should the firm do?
Dog Up! Franks is looking at a new sausage system with an installed cost of $733,200....
Dog Up! Franks is looking at a new sausage system with an
installed cost of $733,200. This cost will be depreciated
straight-line to zero over the project's 10-year life, at the end
of which the sausage system can be scrapped for $112,800. The
sausage system will save the firm $225,600 per year in pretax
operating costs, and the system requires an initial investment in
net working capital of $52,640.
If the tax rate is 25 percent and the discount...
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