Dallas Corporation has variable cost factor 70% and the cost of capital 12%. It has a steady customer, Mr. Dalton, who buys $1500 worth of merchandise every month for cash. Assume that Dalton will continue to buy at this rate forever. Calculate the value added to Dallas by Dalton. To simplify, assume that Dalton buys the merchandise on the first of every month, and calculate the result on that day. $45,450

Now Dallas Corporation has decided to give Mr. Dalton credit on terms 2/10, net 30 days. Dallas has estimated that Dalton will take the discount half the time, and the new policy will result in a 5% increase in the sales to Dalton. Calculate the value of Dalton as a customer to Dallas. Should Dallas offer the new credit terms to Dalton? $45,153, no

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