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Do anyone know the procedure for doing this problem? It’s from Section B part2

• 1.  Do anyone know the procedure for doing this problem? It’s from Section B part2

Posted 05-07-2023 06:11 AM

A corporation has been advised by its accountant that the following four sales volumes could be achieved along with the following receivable payment patterns and credit losses, depending on the company's credit policy (in thousands).
Sales Volume
30 Days
60 Days
90 Days
120 Days
Credit Losses
I.
\$520
\$300
\$100
\$100
\$    0
\$  20
II.
630
200
200
100
100
30
III.
770
200
100
200
200
70
IV.
900
100
200
200
300
100
Assuming that the firm's cost of capital is 20% and that all payments are made on the first possible day of the aging month, which sales volume will maximize profit?

• 2.  RE: Do anyone know the procedure for doing this problem? It's from Section B part2

Posted 05-11-2023 09:43 AM

i can help you with this connect with me on +918754395390

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Arshath Tamimil Ansary Mariam Beevi
Student
Nagercoil TN
India
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• 3.  RE: Do anyone know the procedure for doing this problem? It's from Section B part2

Posted 05-12-2023 01:21 AM

Hi,
I. Sales volume \$500 will maximize profit with given inputs of cost and credit losses.

 Slno: Sales Volume( \$ in Thousands) 30 Days Interest cost ( base 360 days) 60 Days Interest cost ( base 360 days) 90 Days Interest cost ( base 360 days) 120 Days Interest cost ( base 360 days) Credit Losses 20% Net collections inflow % collections to Sales Volume A Total cost - B C  = A -B D=C/A I. 520 300 5.00 100 3.33 100 5 0 - 20 33.33 466.67 89.7% II. 630 200 3.33 200 6.67 100 5 100 6.67 30 51.67 548.33 87.0% III. 770 200 3.33 100 3.33 200 10 200 13.33 70 100.00 600.00 77.9% IV. 900 100 1.67 200 6.67 200 10 300 20.00 100 138.33 661.67 73.5%

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Kishore Kumar Natakala
Other
BENGALURU
India
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