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If a supermarket thinks it can raise sales by offering 1 month of free credit. The price per carton is $100, and the cost per item $65.

If a supermarket thinks it can raise sales by offering 1 month of free credit. The price per carton is $100, and the cost per item $65. The unit sales will increase from 1,050 to 1,110 per month if credit is granted. Assume all customers pay their bills and take full advantage of any credit period offered.



If the interest rate is 1% per month, what will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customer



If the interest rate is 1.5% per month, what will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customers



If the interest rate is 1.5% per month but the firm can offer the credit only as a special deal to new customers, while existing customers will continue to pay cash on delivery. What will be the change in the firm's total monthly profits on a present value basis under these conditions

Top Answer

Present case of profit =units sold * (Sp -Cp) =1050 * (100-65) =36,750... View the full answer

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