Your company is considering changing the terms of its credit from net 30 to 2/15/net 30....
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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? 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?
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Question one NPV Rt1it Rt1it Current quantity sold cu... View the full answer
Related Book For
Intermediate Financial Management
ISBN: 978-1285850030
12th edition
Authors: Eugene F. Brigham, Phillip R. Daves
Posted Date:
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