Provide detailed step by step solution explaining in words on how you get to the answers. The answers are provided to you and highlighted, however you have to explain step by step on how you get to...

Provide detailed step by step solution explaining in words on how you get to the answers. The answers are provided to you and highlighted, however you have to explain step by step on how you get to the answers: 6.1. Carbondale Company has the following credit policy 2/10, net 30. Carbondale also charges 1% per month interest on all accounts after 30 days. The following table shows the collection schedule of all sales: Collection within 10 days 30 days 60 days 90 days Percentage 10% 30% 40% 20% To improve the collection rate, Carbondale is thinking of imposing a higher interest rate, 1.5% per month, on all accounts paid after 30 days. Carbondale believes that the new policy will change the collection schedule as follows: Collection within 10 days 30 days 60 days 90 days Percentage 10% 50% 30% 10% There will be no change in the total sales as a result of this new policy. The cost of capital for Carbondale is 12%. Should it try the new policy? NPV(old) = .9899, NPV(new) = .9921, yes. ? 6.2. Dickson City Company has annual sales of $5 million, while the cost of goods sold is $3.2 million. All sales are made on a cash basis. The owner of Dickson has come up with the plan of giving credit to the customers. He believes that this will increase the sales by 25% without increasing any of the fixed costs. He thinks that 20% of the customers will pay within 30 days, 40% within 60 days, 37% within 90 days, and 3% of the customers will default on the sales. The cost of capital to Dickson is 12%. (A) Should Dickson City introduce the policy of credit sales? NPV(cash) = $1.8 million, NPV(credit) = 1.941 million, yes. ? (B) The manager of the firm doubts whether the sales will actually increase by 25% as a result of this strategy. Find the minimum increase in sales to justify introduction of the new credit policy. 15.92% ? 6.3. Ashley Company is considering the credit application of a retail customer who is expected to buy $1000 worth of merchandise every month. The cost of these goods will be $800. The customer is expected to pay after 30 days every month. However, there is a 10% probability of default each month. In case of default, the company will recover 50% of the unpaid bill after 3 months. The cost of capital to the company is 15% per annum. Should Ashley extend credit to the customer? NPV = 1234, yes ? 6.4. First National Bank of Jermyn has a portfolio of 10,000 credit card accounts. The bank charges $25 annual fee on these cards. There is a 25 day grace period on the accounts, and after that the cardholders pay interest at the rate of 1.25% per month on the unpaid balance. Half of the cardholders pay their balance in full every month, and their monthly bill is $800. The remaining cardholders carry an average balance of $1200 continuously. The operating expenses for the credit card portfolio, including defaults, are $100,000 annually. The cost of capital to the bank is 8%. Mellon Bank has offered to buy Jermyn's credit card portfolio for $5 million, plus the outstanding balance. Should Jermyn accept the offer? NPV = $3.971 million, yes ?