Home Accents currently sells 219 units a month at a price of $46 a unit. If it switches to a net 30 credit policy, monthly sales are expected to increase by 28 units. The monthly interest rate is. 57 percent and the variable cost per unit is $21. What is the net present value of the proposed credit policy switch?

Question

Mills

Business

20 January, 16:52

Home Accents currently sells 219 units a month at a price of $46 a unit. If it switches to a net 30 credit policy, monthly sales are expected to increase by 28 units. The monthly interest rate is. 57 percent and the variable cost per unit is $21. What is the net present value of the proposed credit policy switch?

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Answers (1)

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Judah Adams · Answer 1

Net Present Value per month = $696.03

Explanation:

The net present value is the difference between the present value of cash inflows and the present value of net cash flow

Operating cash flow = (46-21) * 28 = 700

Net present value per month = 700 * 1.0057 ^ (-1)

=$696.03