1. 1.

Evaluating credit policy [LO 20.2] Bismark Co. is in the process of considering a change in its terms of sale. The current policy is cash only; the new policy will involve one period’s credit. Sales are 25 000 units per period at a price of $350 per unit. If credit is offered, the new price will be $368. Unit sales are not expected to change, and all customers are expected to take the credit. Bismark estimates that 3 per cent of credit sales will be uncollectible. If the required return is 2.5 per cent per period, is the change a good idea?