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 = ($71 - $36) (3,500) = $122,500Cash flow from new policy = ($74 - $36) (3,560) = $135,280Incremental cash flow = $135,280 - $122,500 = $12,780NPV of new policy = - [$71(3,500) + $36(3,560 - 3,500)] + $12,780/0.02 = $388,340

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