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How much is the monthly cash flow from the current policy

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Question - A company with an all-cash sales policy has monthly unit sales of 1,740 a month for $245 each. $179 in variable costs are incurred for each unit sold. The company is negotiating with a new retailer to sell their product with credit terms of net 30 days. Company policy requires a rate of return to 0.9%. The business plan that has been prepared shows that by switching to this new retailer, their sales will increase to 1,790 units per month. Finally, the unit selling price will increase to $250 to cover the increase in variable costs to $184.

How much is the monthly cash flow from the current policy?

What will be the monthly cash flow from the new policy be?

How much is the monthly incremental cash flow?

How much is the present value of the future incremental cash flows?

How much is the cost of switching credit policies?

Based on the prepared analysis, what is the NPV of switching policies?

Reference no: EM133167247

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