City Systems sells network software for $20 per copy to computer software distributors and allows its customers 1 month to pay their bills. The cost of the software is $15 per copy. The industry is very new and unsettled; however, and the probability that a new customer granted credit will go bankrupt within the next month is 20%. The firm is considering switching to a cash-on delivery credit policy to reduce its exposure to defaults on trade credit. The discount rate is 1%. Please answer the following two questions: 1.What is the present value of a sales under the current credit terms? 2.Should the firm switch to a cash-on-delivery policy if it causes sales to fall by 60%?

Question 8 options:

	1.14, Yes
	1.00, Yes
	0.84, No
	0.84, Yes