POWER & RESPECT COMES ALONG WITH BUSINESS PLAN'S
Answer:
DSO is 50.34 days and late payment by 5.34 days
Explanation:
In this question, we use the day's sales outstanding formula which is shown below:
Days sales outstanding = (Accounts receivable ÷ Net credit Sales) × total number of days in a year
= ($60,000 ÷ $435,000) × 365 days
= 0.1379 × 365 days
= 50.34 days
Now, the customer paying early or late equals to
= DSO - Credit period
= 50.34 days - 45 days
= 5.34 days
The amount indicates a positive answer which reflects the late payment
Net Present value = Present value of Cash inflows - Present value of Cash outflow is the method for evaluating capital investment proposals reduces the present value of cash outflows from the present value of cash inflows.
Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. NPV is used in capital budgeting and investment planning to analyze the profitability of a projected investment or project. Net Present value is the result of calculations used to find the current value of a future stream of payments.
Net Present value accounts for the time value of money and can be used to compare the rates of return of different projects, or to compare a projected rate of return with the hurdle rate required to approve an investment.
The time value of money is represented in the Net Present value formula by the discount rate, which might be a hurdle rate for a project based on a company's cost of capital. No matter how the discount rate is determined, a negative Net Present value shows the expected rate of return will fall short of it, meaning the project will not create value.
Learn more about Net Present value here
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Answer: The correct answer is "C. discount rate increases.".
Explanation: If everything else held constant, the vertical section of the supply curve of reserves is lengthened when the discount rate increases.
This occurs because the discount rate is the interest rate at which the Central Bank is willing to lend reserves to commercial banks.
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