McDowell Industries sells on terms of 3/10, net 30. Total sales for year are= $912,500; 40 % of customers give on 10th day and get reduction, whereas other 60% pay on average 40 days after their purchases.
i) Find the days' sales outstanding?
ii) Determine the average amount of receivables?
iii) Compute the percentage cost of trade credit to customers who take discount and to those who don’t get it?
iv) Describe what would occur to its accounts receivable if McDowell toughened up on its collection policy with result that all non discount customers paid on 30th day?
2) Let the historical data for the investment in the table given below.
i) Compute the total return (in dollar) for each year.
ii) Point out the level of return you would be expecting in 2015 and in 2016
iii) Describe your forecast.
Year income beginning ending
2010 1.00 30.00 32.50
2011 1.20 32.50 35.00
2012 1.30 35.00 33.00
2013 1.60 33.00 40.00
2014 1.75 40.00 45.00