The Dilana Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2 percent per period. What is the NPV of the new policy given the following information?

Question

Quizplus · Accepted Answer

Cash flow from old policy = ($70 - $36) (3,500) = $119,000Cash flow from new policy = ($74 - $36) (3,560) = $135,280Incremental cash flow = $135,280 - $119,000 = $16,280NPV of new policy = - [$70(3,500) + $36(3,560 - 3,500)] + $16,280/0.02 = $566,840

The Dilana Corporation Is Considering a Change in Its Cash-Only