Please I need fast please I humble request A seller is considering the effect onfirm value from transitioning a long-time customer from cash terms tocredit terms. For years, the customerhas purchased 20 units every 60 days.The seller believes that extendingcredit terms of net 60 days willencourage the customer to increasetheir purchase quantity to 25 units.Each unit sells for $5 and the sellerincurs immediate variable costs of $3per unit. The seller has an annualopportunity cost rate of 3.65%.Assuming that the customer justplaced an order on cash terms, what isthe NPV of extending credit if salescontinue every 60 days in perpetuity?Select one:a.-$1,551.66b.$1,551.66C.$6,706.67d.$8,258.33

NPV stands for "Net Present Value." It is a financial metric used to evaluate the profitability of…

Answered: A seller is considering the effect on…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Your firm needs to purchase 1,200 traffic cones from a supplier. One supplier demands apayment of $1,000.00 today plus $10.59 per cone payable in one year. Another supplier willask for no payment today and $11.59 per cone, also payable in one year. If the discountrate is 8.200% per year compounded annually, how much does your firm save (in terms oftoday’s dollars) by taking the less expensive offer compared to the more expensive offer?
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