Quest, Inc., is considering a change in its cash-only sales policy. The new terms of sale would be one month. The required return is 1.6 percent per month. Based on the following information, what is the NPV of the new policy?

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Quizplus · Accepted Answer

Benefit of switching = ($800 - $425) (1,150 - 1,110) = $15,000Cost of switching = $800 (1,110) + $425 (1,150 - 1,110) = $905,000New policy NPV = $15,000/0.016 - $905,000 = $32,500