This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: c. If the change is considered permanent, what is the NPV of the new terms? Note: Remember the firm buys every four months, so the result of the calculation is a benefit realized every four months (three times a year). If the renegotiation becomes permanent and the firm intends to continue purchasing from this supplier in the same amount on the same frequency, it benefits from the perpetuity in 4-month streams and we need an appropriate periodic interest rate. d. If the change is expected to last only, say, three-years, what is the NPV of the new terms. Note: Calculate the PVA....
View Full Document