Hi can I please have help with this question.

How do you calculate cash Vs credit sales?

How do you calculate NPV analysis to determine if expanding the customer base with credit sales is a better option than the current COD arrangement. Show your workings in the space provided below??

Manager 2 Initial Request Riley Jones, Manager-In-Charge of Manufacturing and Fabrication (Manager 2), has a request related to cash flow-related business decisions. Riley Jones is keen to purchase new fabrication equipment which is much safer to operate, more energy efficient and, therefore, can potentially complete specific key fabrication jobs more economically. The cost reduction is expected make fabrication jobs more affordable, leading to lead to an expanded customer base and, consequently, increased sales. Riley Jones is preparing a business case to support the acquisition of the new equipment and expansion of the customer base but needs your calculations, advice on cash-flow, and an explanation of the tax implications relating to the proposal. Manager 2 (Riley Jones) has provided the following information: a. Expansion of customer base with credit sales This manufactured product is sold on a Cash On Delivery (COD) basis. Monthly sales are currently $150,000, and cost of goods sold is 70% of sales. The new equipment is expected to reduce cost of goods sold to 60%. Customers will no longer be required to pay COD and will be given credit terms of 30 days. This is expected to increase sales to $250,000 per month. It is expected sales will be collected in the following pattern: 20% of customers will pay at the end of one month 25% of customers will pay at the end of 2 months 30% of customers will pay at the end of 3 months 20% of customers will pay at the end of 4 months 5% of customers will become bad debts Cost of capital per month is 1%. b. Acquisition of new equipment The new equipment must pay back FAB Plastics within 4 years. The information in Table 2 below outlines the payback result, which will be included in the acquisition proposal. Table 3 Payback result Calculation Result Cost $4,100,000 Residual value $0 Useful life 5 years Depreciation method Straight line Expected net cashflows: Year 1: $1,200,000 Year 2: $1,200,000 Year 3: $1,100,000 Year 4: $1,000,000 Year 5: $1,000,000