Present value basis if credit is offered to all customers

Assignment Help Financial Management

Reference no: EM131939209

Microbiotics currently sells all of its frozen dinners cash on delivery but believes it can increase sales by offering supermarkets 1 month of free credit. The price per carton is $70, and the cost per carton is $50. The unit sales will increase from 1,170 cartons to 1,230 per month if credit is granted. Assume all customers pay their bills and take full advantage of any credit period offered.

a. 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 customers? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. 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? (Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign.)

c. Assume 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? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference links

Reference no: EM131939209

Questions Cloud

Discuss why it is important to study corrections : Discuss why it is important to study corrections. Define the word corrections. Include information from your text, the article, and the podcast assignments.

What is financial planning : What is Cash Flow, How does company ABC & company Hicksville per say manages their Cash flow? What is Financial Planning?

Calculate vaughns direct materials quantity variance : Vaughn, Inc. makes high-quality swimsuits. Calculate Vaughn's direct materials quantity variance for the year

Explain how this case benefits the american criminal justice : Explain whether this case rules have ever negatively impacted the American criminal justice system using specific examples.

Present value basis if credit is offered to all customers : what will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customers?

What types of processes differ from us criminal procedure : The local Army base commander has asked your Chief of Police for help in understanding criminal procedures at two deployed locations.

Persons suffering from mental depression : A random sample of 100 persons suffering from mental depression reveals that 75 of them cannot properly evaluate their job skills.

Best point estimate of the proportion : Give the best point estimate of the proportion of left-handed kindergarten children.

Find a current event article involving emergency management : The nature and background of the emergency response. Outline terms related to emergency management utilized within the article.

User Account

All Pages