Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Your company is considering changing the terms of its credit from net 30 to 2/15/net 30. Currently the price per unit (P) is $49.98.
Your company is considering changing the terms of its credit from net 30 to 2/15/net 30. Currently the price per unit (P) is $49.98. With the new credit policy, the price (P') will be increased to $51. Current variable cost (V) is $44, and the current quantity sold (Q) is 3,700 units. The expected volume(Q') with the discount is expected to be 3,900 allowing variable cost (V") to fall to $43. The expected default rate is assumed to be the industry average 1.5%. The 15-day discount rate, R*, is 1.25%, meaning use 1.25% in your calculations. 1. How much is the NPV? 2. How much is the breakeven Q*? 3. How much is the breakeven V*? 4. How much is the breakeven TI*? Calculate the difference between the forecasted value in the problem and the breakeven value and divide by the problem value to express the difference as percent of the problem's value. Which of these forecasted variables, is the NPV most sensitive too?
Step by Step Solution
★★★★★
3.54 Rating (171 Votes )
There are 3 Steps involved in it
Step: 1
Question one NPV Rt1it Rt1it Current quantity sold cu...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