Lory Corporation has variable cost per unit of £.35 per £1 of sales.The firm offers a 2% discount for orders paid within 15 days if the customer increases their order size by 5%.A customer normally orders £75,000,and is considering the discount.Normally,the customer pays within 30 days with no discount.Lory 's cost of debt capital is 12%.Would Lory be wise to offer the discount?
Calculate the NPV of the decision.

Question

Lory Corporation has variable cost per unit of £.35 per £1 of sales.The firm offers a 2% discount for orders paid within 15 days if the customer increases their order size by 5%.A customer normally orders £75,000,and is considering the discount.Normally,the customer pays within 30 days with no discount.Lory 's cost of debt capital is 12%.Would Lory be wise to offer the discount?
 Calculate the NPV of the decision.

Quizplus · Accepted Answer

The Answer of Lory Corporation has variable cost per unit of £.35 per £1 of sales.The firm offers a 2% discount for orders paid within 15 days if the customer increases their order size by 5%.A customer normally orders £75,000,and is considering the discount.Normally,the customer pays within 30 days with no discount.Lory 's cost of debt capital is 12%.Would Lory be wise to offer the discount?
 Calculate the NPV of the decision.

Lory Corporation Has Variable Cost Per Unit of £