Suppose a company is considering a switch from all cash to net 30, but the quantity sold

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Suppose a company is considering a switch from all cash to net 30, but the quantity sold is not expected to change. What is the NPV of the switch? Explain.

In this case, Q′ − Q is zero, so the NPV is −PQ. What this says is that the effect of the switch is to postpone one month’s collections forever, with no benefit from doing so.

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Corporate Finance

ISBN: 9781265533199

13th International Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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