Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A company with an all-cash sales policy has monthly unit sales of 1,740 a month for $245 each. $179 in variable costs are incurred for
A company with an all-cash sales policy has monthly unit sales of 1,740 a month for $245 each. $179 in variable costs are incurred for each unit sold. The company is negotiating with a new retailer to sell their product with credit terms of net 30 days. Company policy requires a a rate of return to 0.9%. The business plan that has been prepared shows that by switching to this new retailer, their sales will increase to 1,790 units per month. Finally, the unit selling price will increase to $250 to cover the increase in variable costs to $184. (Negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ signs and commas in your response.) For example: enter 123456 and NOT $123,456 or 123,456 How much is the monthly cash flow from the current policy? What will be the monthly cash flow from the new policy be? How much is the monthly incremental cash flow? How much is the present value of the future incremental cash flows? How much is the cost of switching credit policies? Based on the prepared analysis, what is the NPV of switching policies
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started