Your current sales consist of 45 units per month at a price of $390 a unit.You are weighing the pros and cons of switching to a net 30 credit policy from your current cash only policy.If you decide to switch your credit policy you also plan to increase the sales price to $410 a unit.The monthly interest rate is 1.4 percent.What is the break-even default rate of the proposed switch?
A)3.55 percent
B)3.68 percent
C)4.29 percent
D)4.71 percent
E)4.88 percent

Question

Quizplus · Accepted Answer

d = ($410 - $390)/$410 = 0.048780488π = 0.048780488 - 0.014 (1 - 0.048780488) = 3.55 percent

Your Current Sales Consist of 45 Units Per Month at a Price