Travel and Tow Trailers Inc

question 88

Multiple Choice

Travel and Tow Trailers Inc.makes small trailers for light-duty towing behind SUVs and small pickup trucks.Its trailers typically sell for $2,500.Many of its customers have asked for credit terms to aid in purchasing the trailers.The firm's finance department has estimated the following profile for its light-duty trailers and customer base: Annual sales: 10,000 trailers
Annual production costs per trailer: $1,500
Lost sales if credit is not provided for customers: 2,000 trailers
Default rate if all customers purchase on credit: 3.00%
What is the profit if the firm has a credit policy?

• A)$25,000,000
• B)$9,250,000
• C)$450,000
• D)$8,000,000

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Definitions:

Investment Account

An account held at a financial institution or brokerage that is used to hold securities, stocks, bonds, mutual funds, and other investments.

Proportionate Share

This refers to an investor's or shareholder's portion of profits, losses, or stock based on their percentage ownership in the company.

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and adjusted thereafter for the investor's share of the investee's income or losses.

Investment Revenue

Income generated from the holding of investments like stocks, bonds, real estate, and other assets.