Polly's Home Accents currently sells 320 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?
A)$350,610
B)$350,895
C)$426,507
D)$621,929
E)$821,135

Question

Quizplus · Accepted Answer

NPV of switch = - [($59 × 320) + ($32 × 55)] + [($59 - $32) × 55]/0.004 = $350,610

Polly's Home Accents Currently Sells 320 Units a Month at a Price