Which one of the following statements is correct?
A. The credit period begins when the discount period ends.
B. The discount period is the length of time granted to a customer to pay for a purchase.
C. The credit period begins on the invoice date.
D. With terms of 2/10, net 30, the net credit period is 20 days.
E. With EOM dating, all sales are assumed to have occurred on the 15th of each month.
You are considering renting a kiosk in the local mall for a period of three months. Any
sale you make will be a one-time sale. There is only a 79 percent chance you will
collect payment on a credit sale. The product you want to sell has a variable cost of
$3.88 and a sales price of $4.99. The monthly interest rate is 1.5 percent. Should you
offer people 30 days to pay? Why or why not?
A. yes; because the NPV of a credit sale is $0.09.
B. yes; because the NPV of a credit sale is $0.03.
C. no; because the NPV of a credit sale is -$0.08.
D. no; because the NPV of a credit sale is -$0.02.
E. It doesn't matter because the NPV of a credit sale is approximately zero.
The top-down approach to computing the operating cash flow:
A. ignores noncash expenses.
B. applies only if a project increases sales.
C. applies only to cost cutting projects.
D. is equal to sales - costs - taxes + depreciation.
E. is used solely to compute a bid price.
You need a 25-year, fixed-rate mortgage to buy a new home for $240,000. Your
mortgage bank will lend you the money at a 7.5 percent APR for this 300-month loan,
with interest compounded monthly. However, you can only afford monthly payments of
$850, so you offer to pay off any remaining loan balance at the end of the loan in the