Your firm currently has a cash sales only policy. Under this policy, you sell 340 units a month at a price of $120 a unit. Your variable cost per unit is $94 and your carrying cost per unit is $1.80. The monthly interest rate is 1.5 percent. You think that you can increase your sales to 600 units a month if you institute a net 30 credit policy. What is the net present value of the switch using the one-shot approach?
A) $262,103
B) $333,333
C) $385,427
D) $414,141
E) $447,009

Question

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The Answer of Your firm currently has a cash sales only policy. Under this policy, you sell 340 units a month at a price of $120 a unit. Your variable cost per unit is $94 and your carrying cost per unit is $1.80. The monthly interest rate is 1.5 percent. You think that you can increase your sales to 600 units a month if you institute a net 30 credit policy. What is the net present value of the switch using the one-shot approach?
A) $262,103
B) $333,333
C) $385,427
D) $414,141
E) $447,009

Your Firm Currently Has a Cash Sales Only Policy