Trust Chemicals is considering changing its credit policy. It conducted a net present value (NPV) analysis for both its existing credit policy and proposed credit policy. The net change in NPV on a daily basis is $20 and the expected return is 10%. Assuming there are 360 days in a year, the increase in the firm's value is _____.

Question

Quizplus · Accepted Answer

To calculate the increase in firm's value, we can use the formula:

Increase in firm's value = (Net change in NPV/Expected return rate) x (Number of days in a year)

So, here the increase in firm's value = (20/0.1) x 360 = $72,000.

Therefore, the correct answer is option B.

Trust Chemicals Is Considering Changing Its Credit Policy