Data on Mertz Co

question 131

Multiple Choice

Data on Mertz Co.for the most recent year are shown below,along with the payables deferral period (PDP) for the firms against which it benchmarks.The firm's new CFO believes that the company could delay payments enough to increase its PDP to the benchmarks' average.If this were done,by how much would payables increase? Use a 365-day year.
Cost of goods sold =
$75,000
Payables =
$5,000
Payables deferral period (PDP) =
24) 33
Benchmark payables deferral period =
30) 00

• A) $764
• B) $849
• C) $943
• D) $1,048
• E) $1,164

Recognize the role of systematic risk, market risk premium, and risk-free rate in estimating expected returns using the Security Market Line.

Comprehend the effects of taxes on the cost of debt and WACC.

Identify the variables that influence a firm's Weighted Average Cost of Capital (WACC).

Understand the importance of project risk assessment beyond the use of WACC as a cutoff rate.

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Definitions:

Foreign Competition

Competition that domestic companies face from abroad, from foreign companies offering the same or similar products or services.

Health Care Provider

An individual or institution that provides medical services, including doctors, nurses, hospitals, and clinics.

Market Price

The current price at which an asset or service can be bought or sold in an open market.

Government Intervention

Actions taken by a government to influence or regulate economic activity, often to correct market failures and achieve desired social or economic outcomes.