You are currently selling 72 units a month at a price of $210 a unit. Your variable cost of each unit is $130

You are currently selling 72 units a month at a price of $210 a unit. Your variable cost of each unit is $130. If you switch from your current cash sales only policy to a net 30 policy you think your sales will increase to a total of 95 units per month. The monthly interest rate is 1.5 percent. What is the net present value of this proposed switch using the accounts receivable approach?    A.  $104,557 B.  $114,829 C.  $134,822 D.  $136,516 E.  $141,520

82.

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 d = ($240 - $225)/$240 = 0.0625 NPV = - ($225 × 32) + {($240 × 32) × [(0.0625 - 0.03)/0.015]} = $9,440

83.

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 d = ($410 - $390)/$410 = 0.048780488 π = 0.048780488 - 0.014 (1 - 0.048780488) = 3.55 percent