Your company is considering changing terms to offer a discount. The average price of the products you sell is $10.00. You will allow customers who pay with 15 day to continue to pay $10. But those who do not take the discount and take an additional 10 days to pay will pay $10.25 for each product. The average default rate is 3%. The discount rate you will use for this problem is 0.75%. The units sold are expected to increase from 15,000 units to 15,525. The increase in sales will allow the variable cost to fall from $7.55 to $7.50.

1. How much is the NPV for this credit policy change?
2. What do you recommend?
3. Since the sales volume is an estimate it may be wrong in either direction by 5 units. How much is the NPV if sales are 5 units more than and less than 15,525?
4. What do you recommend?