Cascade International Currently Has Credit Terms of Net 45 with No

question 67

Multiple Choice

Cascade International currently has credit terms of net 45 with no discount and an average collection period of 48 days. Cascade believes that if it offered a 2/15 discount, 60% of its sales would be collected within the discount period and the remaining customers would pay in 50 days. By how many days will Cascade's average collection period change if the discount policy is adopted?

• A) -29 days
• B) -28 days
• C) -19 days
• D) -10 days
• E) 2 days

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Definitions:

Capital Allocation Line

A line that graphically represents the risk-versus-return profile of risky assets, and indicates the optimal portfolio of risky and risk-free assets.

Risk-Free Asset

An investment with a guaranteed return and no risk of financial loss, often represented by government bonds.

Risky Asset

An asset with an uncertain rate of return.

Indifference Curves

Indifference Curves represent a graphical representation of different bundles of goods between which a consumer is indifferent, showing preferences across different combinations of two products.