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Should king fisher bikes proceed with policy change

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After graduating from the GBM program at Humber college you oversee the Accounts Receivable department at King Fisher Bikes. You are looking to find ways to improve the company's performance. Currently the company has a cash only policy where they sell 3,280 bikes at a price of $73 per bike and it costs the company $22 in Material plus $16 in Labour to produce the bike. You are looking to offer credit terms of net one period. You believe that the company will now sell an additional 110 bikes and be able to increase its selling price by two dollars ($2) . The company's required rate of return is 2.5% per period.

Question 1: Should King Fisher bikes proceed with this policy change? Show all your work.

Question 2: How many additional bikes would this company need to sell in order to be neutral with the new credit policy? Show all your work.

Reference no: EM132599604

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