When analyzing the decision to change the cash discount policy,the firm should select the policy that has the:
A)highest order size.
B)lowest variable cost per unit.
C)lowest NPV.
D)highest NPV.
E)lowest cash discount.

Question

Quizplus · Accepted Answer

When analyzing the decision to change the cash discount policy, the firm should select the policy with the highest NPV as it reflects the net present value of the cash flows associated with each policy. The NPV considers the time value of money and all relevant costs and benefits, and therefore, offers the best indication of the profitability of each policy over the long term. The other options, such as order size, variable cost per unit, and cash discount, do not necessarily reflect the overall profitability of the policy.

When Analyzing the Decision to Change the Cash Discount Policy,the