Operating margin of the35%, WACC del 35% and tax rate20%. 

A company has a demand for a product of 1 million units, the unit sales price is 100 pesos per unit. The company finds it difficult to continue maintaining the commercial policy with its clients, of giving credit for 45 days. The competition is being very aggressive: they offer 60 days.

 If the company does not adjust to the new market conditions, it may lose its5%of its sales in units. - The commercial area is therefore not willing to lose that 5%and fight to the death to change the credit policy to 60 days. 

- The financier, however, is not willing and gives two options: 

1. The situation is left as it is losing the5%of sales 

2. It adjusts to 60 days, but requires salespeople to increase the price per unit. 

What should be the minimum sales price of option 2 so that it is better than option 1 if your objective is to maximize EVA?

Answer rating: 100% (QA)

To determine the minimum sales price for option 2 to outperform option 1 in terms of EVA maximization we need to calculate the EVA for both options an... View the full answer