A Firm Currently Sells Its Product with a 2% Discount

question 4

Multiple Choice

A firm currently sells its product with a 2% discount to customers who pay by cash or credit card when they purchase one of the firm's products; otherwise, the full price is due within 30 days. Forty percent of customers take advantage of the discount. The firm plans to drop the discount so the new terms will simply be net 30. In doing so it expects to sell 100 fewer units per month and all customers to pay at day 30. The firm currently sells 1 000 units per month at a cost per unit of $45 and a selling price per unit of $80. If the firm's required return is 2%, what is the net present value (NPV) of making this change?

• A)-$169 860
• B)$64 490
• C)-$122 420
• D)$172 320

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Definitions:

Development Programs

Structured educational or training programs designed to enhance the skills, competencies, and knowledge of employees or individuals.

Overseas Assignments

Work tasks or roles assigned to employees that require them to relocate to foreign countries for a certain period.

Cost-Cutting Measure

Strategies or actions implemented by a company to reduce its expenses and improve profitability.

Shareholder Value

The financial worth that a company delivers to its shareholders, often measured by stock price appreciation and dividend payouts.