only policy to a net 30 credit policy. The price per unit is $500 and the variable cost per unit is $350. The company currently sells 1,400 units per month. Under the proposed policy the company expects to sell 1,500 units per month. The monthly compounded APR is 18%. Calculate the NPV of this switch. Assume that there are 30 days in one month. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit

only policy to a net 30 credit policy. The price per unit is $500 and the variable cost per unit is $350. The company currently sells 1,400 units per month. Under the proposed policy the company expects to sell 1,500 units per month. The monthly compounded APR is 18%. Calculate the NPV of this switch. Assume that there are 30 days in one month. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 5P

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Similar questions

A company is considering switching from a cash only policy to a net 30 credit policy. The price per unit is $700 and the variable cost per unit is $600. The company currently sells 1,000 units per month. Under the proposed policy the company expects to sell 1,200 units per month. The quarterly compounded APR is 15%. If you were using NPV analysis to decide whether the company should switch to the net 30 (1-month) credit policy, what amount would you use for the present value of the incremental cash flows?
A company is considering switching from a cash only policy to a net 30 credit policy. The price per unit is $800 and the variable cost per unit is $600. The company currently sells 1,000 units per month. Under the proposed policy the company expects to sell 1,500 units per month. The quarterly compounded APR is 16%. If you were using NPV analysis to decide whether the company should switch to the net 30 (1-month) credit policy, what amount would you use for the cost of switching? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,234,567.89 should be entered as 1234567.89.) Numeric Response
Panda Co. is planning to change its collection policies that will change the collection period from 5 days to 10 days. The daily projected credit sales for the upcoming year of the company is P40,000. Prevailing rates are expected at 3%. To make the change in collection policy cost-beneficial, the minimum savings in collection cost for the coming year should be?
EFU Group is considering changing its credit period from “net 45" (which has resulted in 8 A/R "Turns" per year) to "net 60" (which is expected to result in 6 A/R “Turns" per year). EFU Group is currently producing a single product with variable costs of $150 and a selling price of $180. Additional annual credit sales of $180,000 from new customers are forecasted, in addition to the current $1.5 million in annual credit sales. The before-tax opportunity cost for each dollar of funds "tied-up" in additional receivables is 30%. Ignoring any additional bad-debt losses that may arise, should EFU Group relax their credit period?
Sanchez, Incorporated, is considering a change in its cash-only sales policy. The new terms of sale would be net one month. The required return is 1.7 percent per month. Current Policy New Policy Price per unit $ 700 $ 700 Cost per unit $ 420 $ 420 Unit sales per month 1,120 1,220 Based on the above information, determine the NPV of the new policy.
Red Hawk, Incorporated, is considering a change in its cash-only sales policy. The new terms of sale would be net one month. The required return is .62 percent per month. Current Policy New Policy Price per unit $ 760 $ 760 Cost per unit $ 555 $ 555 Unit sales per month 820 870 Calculate the NPV of the decision to switch. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Red Hawk, Incorporated, is considering a change in its cash-only sales policy. The new terms of sale would be net one month. The required return is .96 percent per month. Current Policy New Policy Price per unit $ 1,100 $ 1,100 Cost per unit $ 910 $ 910 Unit sales per month 1,160 1,260 Calculate the NPV of the decision to switch. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Typing only. ..
RedRed Hawk, Incorporated, is considering a change in its cash-only sales policy. The new terms of sale would be net one month. The required return is .84 percent per month. Current PolicyNew PolicyPrice per unit$ 980$ 980Cost per unit$ 790$ 790Unit sales per month1,0401,120 Calculate the NPV of the decision to switch. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Red Hawk, Incorporated, is considering a change in its cash-only sales policy. The new terms of sale would be net one month. The required return is .6 percent per month. Price per unit Cost per unit Unit sales per month Current Policy New Policy $ 740 $ 740 $ 540 $540 800 850 Calculate the NPV of the decision to switch. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
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Fitzgerald Corporation currently has an all-cash credit policy. It is considering making a change in the credit policy by going to terms of net 30 days. The required return is .9 percent per month. Price per unit Current Policy $ 245 New Policy Cost per unit $ 179 $ 250 $184 Unit sales per month 1,740 1,790 Calculate the NPV of the decision to change credit policies. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
A company is considering extending credit to a new customer. If the customer is approved, credit would be extended for 1 month. The required return is 1.3% per month. The price per unit is $4,600 and the variable cost per unit is $3,40O. Assume customers who don't default become repeat customers and place the same order every month forever and that a repeat customer will never default. What is the break-even probability of default?