The Turn It Up Corporation sells on credit terms of net 30. Its accounts are, on average, 6 days past due

The Turn It Up Corporation sells on credit terms of net 30. Its accounts are, on average, 6 days past due. Annual credit sales are $7 million. What is the company's balance sheet amount in accounts receivable?    A.  $690,411 B.  $723,333 C.  $851,667 D.  $915,407 E.  $923,593 A/R = $7,000,000 [(30 + 6)/365] = $690,411

88.

Keep M Flying is a wholesaler that stocks engine components and test equipment for the commercial aircraft industry. A new customer has placed an order for eight high-bypass turbine engines, which increase fuel economy. The variable cost is $1.7 million per unit, and the credit price is $2.1 million each. Credit is extended for one period. Based on historical experience, payment for about 1 out of every 240 such orders is never collected. The required return is 3.2 percent per period. What is the NPV per unit if this is a one-time order?    A.  $316,407 B.  $321,819 C.  $326,405 D.  $334,290 E.  $351,056 NPV = -$1,700,000 + [1 - (1/240)] [$2,100,000]/(1 + 0.032) = $326,405

89.

Quest, Inc., is considering a change in its cash-only sales policy. The new terms of sale would be one month. The required return is 1.6 percent per month. Based on the following information, what is the NPV of the new policy?        A.  $28,750 B.  $32,500 C.  $35,000 D.  $38,250 E.  $40,000 Benefit of switching = ($800 - $425) (1,150 - 1,110) = $15,000 Cost of switching = $800 (1,110) + $425 (1,150 - 1,110) = $905,000 New policy NPV = $15,000/0.016 - $905,000 = $32,500