Your fiRm Currently Has a Cash Sales Only Policy

question 45

Multiple Choice

Your firm currently has a cash sales only policy. Under this policy, you sell 340 units a month at a price of $120 a unit. Your variable cost per unit is $94 and your carrying cost per unit is $1.80. The
Monthly interest rate is 1.5 percent. You think that you can increase your sales to 600 units a month
If you institute a net 30 credit policy. What is the net present value of the switch using the one-shot
Approach?

• A) $262,103
• B) $333,333
• C) $385,427
• D) $414,141
• E) $447,009

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Definitions:

Economy's Growth

The increase in the market value of the goods and services produced by an economy over time, typically measured as the percentage increase in real gross domestic product (GDP).

Total Output

The complete quantity of goods or services produced by a firm or within an economy during a given period.

Purely Competitive

A market structure characterized by a large number of small firms, a homogeneous product, and free entry and exit.

Marginal Revenue Product

The additional revenue generated from using one more unit of a factor of production.