Blueroot Inc

question 23

Multiple Choice

Blueroot Inc.is considering a change in its financing policy.Currently,it uses maximum trade credit by not taking discounts on its purchases.The standard industry credit terms offered by all its suppliers are 2/10 net 30 days,and the firm pays on time.The new CFO is considering borrowing from its bank,using short-term notes payable,and then taking discounts.The firm wants to determine the effect of this policy change on its net income.Its net purchases are $11,760 per day,using a 365-day year.The interest rate on the notes payable is 10%,and the tax rate is 40%.If the firm implements the plan,what is the expected change in net income?

• A) $32,964
• B) $34,699
• C) $36,526
• D) $38,448
• E) $40,370

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Definitions:

Prairie Houses

Architectural style developed by Frank Lloyd Wright, characterized by low-pitched roofs, wide eaves, and a strong emphasis on horizontal lines, reflecting the flat, broad landscape of the American Midwest.

Fireplace

A structure within a home or building designed to contain a fire for heating and, in many cases, cooking.

Alexander Calder

An American sculptor known for inventing the mobile, a type of kinetic sculpture that moves with air currents.

Mobile

A kind of sculpture, invented by Alexander Calder, combining nonobjective organic forms and motion in balanced structures hanging from rods, wires, and colored, organically shaped plates.