Polly's Home Accents currently sells 345 units a month at a price of $59 a unit. Polly thinks she can increase her sales by an additional 55 units if she switches to a net 30 credit policy. The monthly interest rate is 0.4 percent and the variable cost per unit is $32. What is the net present value of the proposed credit policy switch?

Question

Quizplus · Accepted Answer

NPV of switch = - [($59 F1F1F1S1F1F1F10 345) + ($32 F1F1F1S1F1F1F10 55)] + [($59 - $32) F1F1F1S1F1F1F10 55]/0.004 = $349,135

Polly's Home Accents Currently Sells 345 Units a Month at a Price