Lory Corporation has variable cost per unit of £.35 per £1 of sales.The ﬁrm offers a 2% discount for
orders paid within 15 days if the customer increases their order size by 5%.A customer normally
orders £75,000, and is considering the discount.Normally, the customer pays within 30 days with
no discount.Lory 's cost of debt capital is 12%.Would Lory be wise to offer the discount? Calculate
the NPV of the decision.

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The Answer of Lory Corporation has variable cost per unit of £.35 per £1 of sales.The ﬁrm offers a 2% discount for
orders paid within 15 days if the customer increases their order size by 5%.A customer normally
orders £75,000, and is considering the discount.Normally, the customer pays within 30 days with
no discount.Lory 's cost of debt capital is 12%.Would Lory be wise to offer the discount? Calculate
the NPV of the decision.

Lory Corporation Has Variable Cost Per Unit of £