Currently,Glasgow Importers sells 280 units a month at a price of $729 a unit.The firm believes it can increase its sales by an additional 40 units if it switches to a net 30 credit policy.The monthly interest rate is 0.5 percent and the variable cost per unit is $480.What is the net present value of the proposed credit policy switch?
A)-$213,360
B)-$9,240
C)$190,200
D)$1,287,520
E)$1,768,680

Question

Quizplus · Accepted Answer

NPV = - [($729 × 280) + ($480 × 40)] + [($729 - $480) × 40]/0.005 = $1,768,680

Currently,Glasgow Importers Sells 280 Units a Month at a Price