Red Hawk, Incorporated, is considering a change in its cash-only sales policy. The new terms of sale would be net one month. The required return is .6 percent per month. Price per unit Cost per unit Unit sales per month Current Policy New Policy $ 740 $740 $ 540 $ 540 800 850 Calculate the NPV of the decision to switch. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV

Red Hawk, Incorporated, is considering a change in its cash-only sales policy. The new terms of sale would be net one month. The required return is .6 percent per month. Price per unit Cost per unit Unit sales per month Current Policy New Policy $ 740 $740 $ 540 $ 540 800 850 Calculate the NPV of the decision to switch. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter12: Corporate Valuation And Financial Planning

Section: Chapter Questions

Problem 2STP

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A company is considering switching from a cash only policy to a net 30 credit policy. The price per unit is $500 and the variable cost per unit is $350. The company currently sells 1,400 units per month. Under the proposed policy the company expects to sell 1,500 units per month. The monthly compounded APR is 18%. Calculate the NPV of this switch. Assume that there are 30 days in one month. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50) .
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