Lory Corporation Has Variable Costs Per Unit of

question 41

Essay

Lory Corporation has variable costs per unit of $.35 per $1 of sales. The firm offers a 2% discount for orders paid within 15 days if the customer increases their order size by 5%. A customer normally orders $75,000,and is considering the discount. Normally,the customer pays within 30 days with no discount. Lory 's cost of debt capital is 12%. Would Lory be wise to offer the discount?
Calculate the NPV of the decision.

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Definitions:

Verification of Eligibility

The process of confirming whether an individual meets the criteria to participate or receive benefits from a particular government, insurance, or service program.

Participating Provider

A healthcare provider who has agreed to accept predetermined fees for services provided to members of a specific insurance plan or network.

Insurer

An entity that provides insurance coverage to individuals or organizations, assuming the risk for specified losses.

Patient-Centered Medical Home (PCMH)

A health care delivery model designed to provide comprehensive, coordinated, and continuous care to patients with the goal of optimizing health outcomes.