FCF 7thE Chapter21 Stu

8/11/2019 FCF 7thE Chapter21 Stu

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Chapter 21Problems 4,7,9,10,11,16,18

Input boxes in tanOutput boxes in yellowGiven data in blueCalculations in redAnswers in green


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Chapter 21Question 4

Input Area:

Credit salesCollection periodCost of production (% of sales)

Output Area:

Daily sales -$

Average A/R -$


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Input Area:

Terms /NetDiscount used %New terms /New netUnits soldUnit price

Output Area:

Total credit sales -$ ACP - Receivables turnover #DIV/0!

Average receivables #DIV/0!

If the firm increases the cash discount, then morepeople will pay sooner, thus lowering the averagecollection period. If the ACP declines, receivablesturnover increases, which will lead to a decreasein average receivables.


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Input Area:

Quantity orderedVariable costsCredit priceUncollected ordersRequired return

Output Area:

a. NPV (per unit) -$Do not fill the order

b. p #DIV/0!

c. NPV (per unit) #DIV/0!#DIV/0!

p #DIV/0!

It is assumed that if a person has paidhis or her bills in the past, then they willpay their bills in the future. This impliesthat if someone doesn't default whencredit is first granted, then they will be agood customer far into the future, andthe possible gains from the futurebusiness outweigh the possible lossesfrom granting credit the first time.


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Input Area:

Required return

Current Policy New PolicyPrice per unitCost per unitUnit sales per month

Output Area:

Cost of switching -$Perpetual benefit of switching -$

NPV #DIV/0!

The firm will have to bear the cost of sales for onemonth before they receive any revenue from creditsales, which is why the initial cost is for one month.Receivables will grow over the one month creditperiod, and then will remain about stable withpayments and new sales offsetting one another.


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Input Area:

Number of items usedFrequency of order Carrying cost per unitFixed order cost

Output:

Carrying cost -$Order cost -$EOQ #DIV/0!

The firm's ordering policy is optimalThe company should #DIV/0!the order size and #DIV/0!the number of orders.


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Input Area:

Required return


Output Area:

Breakeven quantity #DIV/0!


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Input Area:

NetRequired return


Output Area:

Breakeven price #DIV/0!

FCF 7thE Chapter21 Stu

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