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Dec 10 Q.3 part c Q.78
Assuming that only 25% of customers take the early settlement discount, what is the maximum early settlement discount that could be offered?
Why is it calculated on the gross benefit of $1050 instead of the net benefit of $831 please (.831/21.9)?June 15 Q.20
Why the net asset value is calculated as total assets less current and long term liabilities instead of total assets less current liabilities please?1. The net benefit of 831 is the net benefit if the discount is 1% (the first part of (c)).
The maximum discount they can afford to give would be when the net benefit was zero (lower discount would mean a benefit; higher discount would mean a loss).
So for a net benefit of zero, the cost of the discount would have to equal the total benefits and therefore be 1,050.2. The question wants the value of shares in the company. It is always equal to the net asset value, which is always total assets less total liabilities.
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