FIN 3702 ASSIGNMENT 2

QUESTION 1 The cost of giving up a cash discount under the terms 5/20 net 120 assuming a 365-day year is … 1. 15.00%. 2. 15.80%. 3. 18.94%. 4. 19.21%. The correct answer is option 4. 19.21% Cost of giving up a cash discount = = = 19.21% Gitman et al 2010, chapter 15:607 Gitman et al 2014, chapter 16:625 3 QUESTION 2 A firm has actual sales in November of R1 000 and projected sales in December and January of R3 000 and R4 000 respectively. The firm makes 15% of sales for cash, collects 45% of its sales one month following the month of sale and collects the balance two months following the month of sale. The firm’s total expected receipts in January are … 1. R 700. 2. R1 900. 3. R2 100. 4. R2 350. R600 + R1 350 + R400 = R2 350 Month November December January (actual) (forecast) (forecast) Forecasted sales (R) 000 Cash sales (R) 15% Credit sales (R) 45% - 450 1 350 Credit sales (R) 40% - - 400 Totals (R) 2 350 Prescribed book 2010 e