- Zn 1 G Se 1 Dn Px 1 Bn 1 G Se 1 Px 1 Bn Exp 1 G Se Vcr 1 G Se 1 Idpn 1 Icpn 1 1 (19.58 KiB) Viewed 49 times
I have added the equation that is needed for the problem.
ZN [(1 + g)Se](1 - dn)Px(1 - bn) [(1+g)Se](1 - Px)(1 – bn) EXP [(1 + g)Se] - VCR[(1 + g)Se] - (1 + iDPn) (1 + iCPn) (1 + iCPN) = +
Use the following information for questions 1-6. Siegel Apparel currently offers its customers terms of net 30, but it is considering a switch to 3/10, net 45 (a 3% discount if paid within 10 days). Under the discount, Siegel expects a 4% increase in its current annual sales of $400,000. The bad debt rate is expected to decline from 5% to 3%. Siegel estimates that 30% of customers will take advantage of the discount, paying in an average of 9 days. The remainder of customers will pay in 53 days, on average. Siegel's VCR is 0.65, cost of capital is 18% per year, and faces credit/administration costs of 4% of sales.
1. Calculate the daily NPV of the new credit policy (Zn).