Assume that trade credit of 2/10 net 30 will increase sales by 15% because the d

Question

Assume that trade credit of 2/10 net 30 will increase sales by 15% because the discount makes the companies discount price competitive. If a company earns 20% on sales before discounts should it offer the discount?

A. Yes, it will make a profit of $17,875

B. No, it will lose $1,748

C. Yes, it will make a profit of $1,748.

D. No it will not make enough to worry about

Spider Man Roofing has purchased a piece of equipment costing $100,000. It is expected to generate a ten-year stream of benefits amounting to $16,273 per year. Determine the rate of return the company expects to earn from this equipment.

A. a.   16.3%

B. b.   12.7%

C. c.   10%

D. d.   15%

Explanation / Answer

First question incomplete

Spider Man Roofing

rate of return = Annual benefit / Original Investment = $16273/$100000 = 16.3%

Answer:A. a.   16.3%

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