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What is the present value of credit sales

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Reference no: EM132942394

Problem 1: LittleBiz sells all of its products on credit with terms of 3/30, net 60. A collection analysis reveals 30% of customers pay within the 1st month after sale; 55% pay within the 2nd month after sale and 10% pay within the 3rd month after sale. 5% are never collected. Assume that each month has 30 days and that the current cost of capital is 1% per month. What is the present value of every $1.00 of credit sales?

Select one:

a. $0.9725
b. $0.9225
c. $0.9500
d. $0.9244

Reference no: EM132942394

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