Your Current Sales Consist of 45 Units Per Month at a Price

question 5

Multiple Choice

Your current sales consist of 45 units per month at a price of $390 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 $410 a unit.The monthly interest rate is 1.4 percent.What is the break-even default rate of the proposed switch?

• A)3.55 percent
• B)3.68 percent
• C)4.29 percent
• D)4.71 percent
• E)4.88 percent

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Definitions:

Anvil

A heavy iron block typically used in metalworking upon which metal can be hammered and shaped.

Stirrup

A small U-shaped bone in the middle ear that transmits sound vibrations from the anvil to the cochlea. Alternatively, it refers to a device attached to the saddle in horse riding, supporting the rider's foot.

Frequency Theory

A theory in hearing that suggests the perception of pitch is related to the rate at which the entire basilar membrane vibrates, indicating that the frequency of the sound wave is mimicked by the firing rate of the auditory nerve.

Basilar Membrane

A structure in the cochlea of the inner ear that plays a critical role in sound perception, vibrating in response to sound and contributing to the separation of different frequencies for auditory processing.