The Harrington Corporation is considering a change in its cash-only policy. The
ID: 2638863 • Letter: T
Question
The Harrington Corporation is considering a change in its cash-only policy. The new terms would be net one period. Based on the following information, determine if Harrington should proceed or not. The required return is 2.5 percent per period.
Current Policy
New Policy
Price per unit
$ 86.00
$ 88.00
Cost per unit
$ 47.00
$ 47.00
Unit sales per month
3510
3620
Current Policy
New Policy
Price per unit
$ 86.00
$ 88.00
Cost per unit
$ 47.00
$ 47.00
Unit sales per month
3510
3620
Explanation / Answer
if it follows the new terms, then the sales are 3620 and price is 88 cost is 47
the total net margin= (88-47) 3620
= $148,420
under old stragey=
=(86-47)3510
=$136,890
it can follow the new strategy to get more margin
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