Your company is considering changing terms to offer a discount. The average price of the products you sell is
$10.00. You will allow customers who pay with 15 day to continue to pay $10. But those who do not take the discount and take an additional 10 days to pay will pay $10.25 for each product. The average default rate is 3%. The discount rate you will use for this problem is 0.75%. The units sold are expected to increase from 15,000 units to 15,525. The increase in sales will allow the variable cost to fall from $7.55 to $7.50.
A. How much is the NPV for this credit policy change?
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