Your firm currently makes only cash sales. You estimate that allowing trade credit on terms of net
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Your firm currently makes only cash sales. You estimate that allowing trade credit on terms of net 30 would increase monthly sales from 200 to 220 units per month. The price per unit is $101 and the cost (in present value terms) is $80. The interest rate is 1% per month. If the probability of payment is no better than 0.8, what is the expected profit of granting credit? How does the repeat sale affect your credit decision?
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0078034640
7th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
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