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Your company currently accepts cash sales for the sale of golf shoes, but it is considering offering new credit terms for one period. Based on the proposed credit policy, the price of one pair will increase from $65 to $70. You are expecting to sell 600 additional pairs per period. Under the cash-only policy, your company sells 4,500 pairs per period. There will not be any change in the variable cost, and it will remain at $40 per pair. In addition to these changes, the accounting department conducts an aging schedule analysis and expects bad debt losses to be $13,500 per period. Your company will finance additional investment in receivables by using a line of credit, which charges 5% interest for each period. Your company's tax rate is 45%. Calculate the NPV of this switch (Do not use the $ sign. If your answer is -$12,000, enter -12000, and if your answer is +$12,000, then enter 12000). Numeric Response

Your company currently accepts cash sales for the sale of golf shoes, but it is considering offering new credit terms for one period. Based on the proposed credit policy, the price of one pair will increase from $65 to $70. You are expecting to sell 600 additional pairs per period. Under the cash-only policy, your company sells 4,500 pairs per period. There will not be any change in the variable cost, and it will remain at $40 per pair. In addition to these changes, the accounting department conducts an aging schedule analysis and expects bad debt losses to be $13,500 per period. Your company will finance additional investment in receivables by using a line of credit, which charges 5% interest for each period. Your company's tax rate is 45%. Calculate the NPV of this switch (Do not use the $ sign. If your answer is -$12,000, enter -12000, and if your answer is +$12,000, then enter 12000). Numeric Response

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Your company currently accepts cash sales for the sale of golf shoes, but it is considering offering new credit terms for one period. Based on the proposed credit policy, the price of one pair will increase from $65 to $70. You are expecting to sell 600 additional pairs per period. Under the cash-only policy, your company sells 4,500 pairs per period. There will not be any change in the variable cost, and it will remain at $40 per pair. In addition to these changes, the accounting department conducts an aging schedule analysis and expects bad debt losses to be $13,500 per period. Your company will finance additional investment in receivables by using a line of credit, which charges 5% interest for each period. Your company's tax rate is 45%. Calculate the NPV of this switch (Do not use the $ sign. If your answer is -$12,000, enter -12000, and if your answer is +$12,000, then enter 12000). Numeric Response
Transcribed Image Text:Your company currently accepts cash sales for the sale of golf shoes, but it is considering offering new credit terms for one period. Based on the proposed credit policy, the price of one pair will increase from $65 to $70. You are expecting to sell 600 additional pairs per period. Under the cash-only policy, your company sells 4,500 pairs per period. There will not be any change in the variable cost, and it will remain at $40 per pair. In addition to these changes, the accounting department conducts an aging schedule analysis and expects bad debt losses to be $13,500 per period. Your company will finance additional investment in receivables by using a line of credit, which charges 5% interest for each period. Your company's tax rate is 45%. Calculate the NPV of this switch (Do not use the $ sign. If your answer is -$12,000, enter -12000, and if your answer is +$12,000, then enter 12000). Numeric Response
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