A company is considering extending creait to a new customer. If the customer is approved, credit would be extended for 1 month. The required return is 1.3% per month. The price per unit is $4,600 and the variable cost per unit is $3,400. Assume customers who don't default become repeat customers and place the same order every month forever and that a repeat customer will never default. What is tho hroak probability of dofault2
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- Suppose you owe $15,000 on a credit card that carries an APR of 24%. Because the balance is so high, you choose to stop charging and pay off the card. You can afford to make only the minimum monthly payment, which is 5% of the balance. Then your balance after t months is given by B = 15,000(1.02 ✕ 0.95)t dollars. How many payments will you have to make to get the balance below $200? (Enter the smallest such number of payments as an integer.)A consumer loan requires monthly payments, in equal amounts, $700.00. The next payment is due in one month. Assume that the appropriate discount rate is 21% (APR). What is the effective annual rate? (show them in excel spreadsheet, write your own present value formulas, don't use Excel built-in functions.A supplier will give Shark Unibase Company a discount of 2% if an invoice is paid 60 days before its due date. Suppose Shark wants to take advantage of this discount but needs to borrow the money. It plans to pay back the loan in 60 days. What is the highest annual simple interest rate at which Shark Unibase can borrow the money and still save by paying the invoice 60 days before its due date?
- You owe $6000 on your Chase card, and it has an APR of 21.99%. In the mail, you get an offer from another credit card company that offers you 0% APR for the first 12 months. What is a strategy you can take to help save you money? How can this strategy, however, prove dangerous potentially?A guy is wondering which account he should invest in Account A- earns an APR of 4% of compunded monthly Account B- intrest is compunded daily, and the effective annual rate is 4%(APR is unknown) In Account B the 4% is an effective annual rate does this mean Account B is better if money is left in there for one year? If the money is left in there for 1 or more year does it make a diffrence?Assume the credit terms offered to your firm by your suppliers are 2/20, net 40. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 40. (Hint: Use a 365-day year.)
- A broker wants to sell a customer an investment costing $100 with an expected payoff in one year of $108.6. The customer indicates that a 8.6 percent return is not very attractive. The broker responds by suggesting the customer borrow $80 for one year at 6.6 percent interest to help pay for the investment. a. What is the customer's expected return if she borrows the money? (Round your answer to 1 decimal place.) Customer's expected return %Han Corp's sales last year were $300,000, and its year-end receivables were $49,000. The firm sells on terms that call for customers to pay 30 days after the purchase, but some delay payment beyond Day 30. On average, how many days late do customers pay? Base your answer on this equation: DSO - Allowed credit period = Average days late, and use a 365-day year when calculating the DSO. Assume all sales to be on credit. Do not round your intermediate calculations.You have just purchased new goods worth 10,000 EUR from your supplier. Your supplier offers you to pay within 35 days. If you pay within the first 5 days, you get a discount of 1%. You know that he might accept a further delay, because he has a quite bad receivables management, but if he notices, which you estimate has a probability of roughly 50%, you might get an additional fee of 1000 EUR. You need your next delivery in 60 days and you know he will not deliver the new goods unless you pay the outstanding invoice. When would you pay? Why? What is the effective interest rate?
- 3.You have the opportunity to make a one-time sale if you will give a new customer 30days to pay. You suspect there is a 15 percent chance this person will never pay you. The sales price of the item the customer wants to buy is $289. Your variable cost on that item is $156 and your monthly interest rate is 1.75percent. Should you grant credit to this customer? Why or why not?Suppose you take out a home mortgage for $160,000 at a monthly interest rate of 0.6%. If you make payments of $1200/month, after how many months will the loan balance be zero? Estimate the answer by graphing the sequence of loan balances and then obtain an exact answer. Graph the sequence of loan balances. Choose the correct graph below. O A. 160,000 its 125 months loan balance 150 Q Q The loan balance will be zero after 269 months. (Round up to the nearest month.) O B. loan balance 160,000 125 150 months Q O loan balance 160,000 260 290 months Q O D. 160,000 it loan balance 260 ¹290 months Ⓒ QGallant Sdn. Bhd., offers a credit period of 4 weeks. The price and cost per unit of its product are, respectively, RM26 and RM22. The firm’s required return (EAR) on receivables is 1% for the period of 4 weeks. (a) If the probability of default of a particular one-time customer is 20%, should the firm sell on credit to this customer? (b) What is the maximum probability of default of a one-time customer that Gallant Sdn. Bhd., should sell to on credit? Justify your decision. (c) If the probability of default of another customer is also 20%, but it is likely that the customer will be a repeat customer who buys from the firm every 4 weeks, should the firm sell on credit to this customer? (d) What is the maximum probability of default of a customer that Gallant Sdn. Bhd., should sell to on credit, if the customer is likely to be repeat customer who buys from the firm every 4 weeks? Justify your decision. (e) Now, if the firm’s required return on receivables is 11% based on EAR (and…