Currently,Glasgow Importers Sells 280 Units a Month at a Price

question 33

Multiple Choice

Currently,Glasgow Importers sells 280 units a month at a price of $729 a unit.The firm believes it can increase its sales by an additional 40 units if it switches to a net 30 credit policy.The monthly interest rate is 0.5 percent and the variable cost per unit is $480.What is the net present value of the proposed credit policy switch?

• A)-$213,360
• B)-$9,240
• C)$190,200
• D)$1,287,520
• E)$1,768,680

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Definitions:

Hourly Wage

Compensation paid to employees based on the number of hours worked, typically expressed as an amount of money per hour.

Parking

The act of stopping and disengaging a vehicle and leaving it unoccupied.

Implicit Costs

Additional costs that do not appear on the financial statements of a company. These costs include items such as the opportunity cost of capital.

Economic Profits

Profits that exceed the opportunity costs of all resources used by the firm, including both explicit and implicit costs.