What is the npv of switching to a credit policy

Assignment Help Finance Basics
Reference no: EM131493559

Edgeworth Co. has an all-cash policy and sells 50 units per month at $920 a unit. The variable cost is $700 a unit. Should the firm grant a 30days of credit, it expects its sales would rise to 60 units without changes to price or costs per unit. The default rate on credit customers is predicted to be 2.25 percent. The monthly required return is .75 percent. What is the NPV of switching to a credit policy?

A. $266,667

B. 346,333

C. 366,667

D. 240,333

E. 258,778

Reference no: EM131493559

Questions Cloud

Explain how a students increased online learning experience : Write a 1,050- to 1,400-word paper in which you combine the principles of the theory to explain how a student's increased online learning experience
Drivers for healthcare administrators : Explain current and future implications of these drivers for healthcare administrators.
Explore the advantages of marketing tools used in healthcare : Explore the advantages and disadvantages of marketing tools used in healthcare.What marketing tools would be most useful and effective .
What business do you want to start and why : What business do you want to start, and why? Do you notice a large range of prices that businesses are charging for the service or product?
What is the npv of switching to a credit policy : The default rate on credit customers is predicted to be 2.25 percent. The monthly required return is .75 percent.
Determine the square-law behavior : Consider a MOS transistor configured as a CS stage and operating in saturation. Determine the IP3 and P1dB if the device
Effective rate of interest the customer : What is the effective rate of interest the customer is paying by not taking the discount? Assume a 365-day year.
Describe your familys history of social mobility : Describe your family's history of social mobility through at least three generations. Predict your own social mobility and if you have children, their mobility.
Determine overall noise figure in terms of the nf of the lna : Suppose in Fig., the LNA has a voltage gain of A0 and the mixers have a high input impedance. If the I and Q outputs are simply added, determine the overall.

Reviews

Write a Review

Finance Basics Questions & Answers

  Prepare a loan amortization table

Newgen hotel successfully applies for a loan of $500000 on first year. the duration of the loan is 3 years and the rate of 10% per annum. principal and interest are payable in equal installments of every end of a year. required the annual repayment t..

  How value at risk can used by companies to manage exchange

A company experiences transaction exposure when its payables and receivables are impacted by unexpected changes in exchange rates because the contract is in a foreign currency. A company experiences contingent exposure when it has international co..

  Estimate the cost of retained earnings for a company

Suppose the current risk-free rate of return is 5 percent and the expected market risk premium is 7 percent. Using this information, estimate the cost of retained earnings for a company with a beta coefficient equal to 2.0?

  What is the price of the stock now

The stock of Cacique Corp., is expected to have earnings per share (EPS) next year of $6 per share. The required return for its stock is 15%.

  Determining random sample from normal population

Random sample is attained from normal population with the mean of µ = 80 and standard deviation of σ = 8. Which of the following outcomes is more probable? Describe your answer.

  What is the new equilibrium price and quantity

This resulted in a parallel shift in the demand for bonds, such that the price of bonds at all quantities increased $50. Assuming no change in the supply equation for bonds, what is the new equilibrium price and quantity? What is the new market inter..

  Construct and explain an approach to the acquisition that

the wycombe company is doing well and is interested in diversifying so its been looking around for an acquisition

  Estimating the rate of return on investment

Assume that you wish to purchase a 12-year bond that has a maturity value of $1,000 and a coupon interest rate of 11%, paid semiannually. If you require a 7.6% rate of return on this investment (YTM), what is the maximum price that you should be w..

  Changes in a bonds cash flows associated

Changes in a bonds cash flows associated with changes in yield would be reflected in the bond's a. Effective Duration b. Modified Duration c. Macaulay Duration

  Why might the investment objective of a portfolio manager

why might the investment objective of a portfolio manager of a life insurance company be different from that of a

  Use of debt intensifies the firm''s business risk borne

The use of debt intensifies the firm's business risk borne by the common stockholders. As a result, shareholders of a firm with higher debt ratio would require a higher return compared to a similar firm without debt

  Q 1 dan is also thinking whether to issue coupon bearing

q. 1 dan is also thinking whether to issue coupon bearing bonds or zero coupon bonds. ytm on either bond issue will be

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd