Barness Corporation, with sales of $6,480,000, is considering changing its terms from net 40 to 2/15, net
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Barness Corporation, with sales of $6,480,000, is considering changing its terms from "net 40" to "2/15, net 30." Currently, customers pay on day 45. The company forecasts that 60% of its customers would take the discount and pay on day 15 while the remainder would continue to pay on day 45 (use a 360-day year). Sales is not expected to change. Idle cash balances would also decrease by $30,000. Barness's variable costs are 80% of sales, its tax rate is 40%, and it has a 14% cost of capital.
What is the net present value (NPV) of the proposal?
A.$ 85,543.
B.$ 20,743.
C.– $201,429.
D.– $ 44,057.
Related Book For
Introduction to Corporate Finance What Companies Do
ISBN: 978-1111222284
3rd edition
Authors: John Graham, Scott Smart
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