Red Hawk, Incorporated, is considering a change in its cash-only sales policy. The newterms of sale would be net one month. The required return is .9 percent per month.Price per unitCost per unitUnit sales per monthCurrent Policy$ 1,040$ 8501,100NPVNew Policy$ 1,040$ 8501,200Calculate the NPV of the decision to switch. (Do not round intermediate calculationsand round your answer to 2 decimal places, e.g., 32.16.)

NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Answered: Red Hawk, Incorporated, is considering…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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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.)
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Fitzgerald, Incorporated, 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 .67 percent per month. Price per unit Cost per unit Unit sales per month Current New Policy Policy $170 $173 $ 134 $ 137 1,290 1,320 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 Answer is complete but not entirely correct. $ 646.71
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