Question: need help! will leave immediate feedback! Zapdash Electric Vehicles is considering a change to its credit policy. It will hire a collections agency to collect

need help! will leave immediate feedback!
need help! will leave immediate feedback! Zapdash Electric Vehicles is considering a

Zapdash Electric Vehicles is considering a change to its credit policy. It will hire a collections agency to collect its accounts receivable, which will have the following effects: Bad debts will fall by 58% Expenses will rise by $515,000 Sales will rise by $190,000 The IRR of the change is 12.6% The NPV of the change is -$42,000 Days Sales Outstanding will fall from 53 days to 42 days Should Zapdash approve the change? Yes, because bad debts will fall by 58%, increasing Zapdash's collection rate Yes, because the Days Sales Outstanding change will reduce the Cash Conversion Cycle by 11 days No, because expenses will rise by $515,000 due to the cost of hiring the agency No, because the NPV of the change is negative No, because sales will only rise by $190,000, which is less than the increase in expenses

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!