Dear Friends,
How can I solve this problem?
Regards
A company is reviewing its trade credit policy with respect to the small retailers to which it sells. Four plans have been studied and the results are as follows:
|
|
Annual
|
Bad
|
Collection
|
Accounts
|
|
|
Plan
|
Revenue
|
Debt
|
Costs
|
Receivable
|
Inventory
|
|
|
|
|
|
|
|
|
A
|
$200,000
|
$ 1,000
|
$1,000
|
$20,000
|
$40,000
|
|
B
|
250,000
|
3,000
|
2,000
|
40,000
|
50,000
|
|
C
|
300,000
|
6,000
|
5,000
|
60,000
|
60,000
|
|
D
|
350,000
|
12,000
|
8,000
|
80,000
|
70,000
|
The information shows how various annual expenses, such as bad debts and the cost of collections, change as sales change. The average balance of accounts receivable and inventory have also been projected. The cost of the product to the company is 80% of the selling price, after-tax cost of capital is 15%, and the effective income tax rate is 30%. What is the optimal plan for the company to implement?------------------------------
TIMUCIN ONER
Director/Manager
ANTALYA
Turkey
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