Your Current Sales Consist of 25 Units Per Month at a Price

question 366

Multiple Choice

Your current sales consist of 25 units per month at a price of $200 a unit. You are weighing the pros and cons of switching to a net 30 credit policy from your current cash only policy. If you decide to
Switch your credit policy you also plan to increase the sales price to $215 a unit. If you make the
Switch you do not expect your total monthly sales quantity to change but you do expect a 2 percent
Default rate. The monthly interest rate is 2.5 percent. What is the net present value of the proposed
Credit policy switch?

• A) $0
• B) $5,000
• C) $5,700
• D) $10,000
• E) $10,700

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Definitions:

Sales Tax

A tax imposed by governments on sales transactions, typically calculated as a percentage of the sale price of goods and services.

Internet Transactions

Commercial operations carried out online, including buying, selling, and the exchange of services or information.

Congress

The law-making division of the United States federal government, which includes the Senate and the House of Representatives.

Establishment Clause

A provision in the First Amendment of the U.S. Constitution that prohibits the government from establishing an official religion or favoring one religion over another.