12. Terms of Sale. Microbiotics currently sells all of its frozen dinners cash on delivery but believes
Question:
12. Terms of Sale. Microbiotics currently sells all of its frozen dinners cash on delivery but believes it can increase sales by offering supermarkets 1 month of free credit. The price per carton is $50, and the cost per carton is $40. (LO4)
a. If unit sales will increase from 1,000 cartons to 1,060 per month, should the firm offer the credit? The interest rate is 1% per month, and all customers will pay their bills.
b. What if the interest rate is 1.5% per month?
c. What if the interest rate is 1.5% per month but the firm can offer the credit only as a special deal to new customers, while old customers will continue to pay cash on delivery?
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9780073382302
6th Edition
Authors: Richard A Brealey, Stewart C Myers, Alan J Marcus