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.

A.How much is the NPV for this credit policy change?

B.What do you recommend?

C.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?

D.What do you recommend?