Calculate the npv of this switch

Reference no: EM132756233

Question: First Inc. currently grants no credit, but it is considering offering new credit terms of net 30. As a result, the price of its product will increase from $40 to $43. Expected sales will increase by 800 units per year. The original sales are 10,000 units per year. Variable costs will remain at $20 per unit and bad debt losses will amount to $25,000 per year. The firm will finance additional investment in receivables by using a line of credit, which charges 5% interest. The firm's tax rate is 40%. Calculate the NPV of this switch (Do not use the $ sign. If your answer is -$12,000, enter -12000, and if your answer is +$12,000, then enter 12000).

Reference no: EM132756233

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