Your Current Sales Consist of 32 Units Per Month at a Price

question 70

Multiple Choice

Your current sales consist of 32 units per month at a price of $225 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 $240 a unit.If you make the switch you do not expect your total monthly sales quantity to change but you do expect a 3 percent default rate.The monthly interest rate is 1.5 percent.What is the net present value of the proposed credit policy switch?

• A)$6,727
• B)$6,893
• C)$7,965
• D)$9,440
• E)$9,481

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Definitions:

Competing Firms

Companies that operate in the same industry and vie for the same consumer base or market share.

Food Products

Items derived from agriculture or animal farming that are intended for consumption.

Technological Advances

Improvements in technology, leading to more efficient production processes or innovative products.

Information Technologies

The use of computers, software, and telecommunications to store, retrieve, transmit, and manipulate data, often in the context of business operations.