The Harrington Corporation is considering a change in its cash-only policy. The

Question

The Harrington Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2.5 percent per period.

Current Policy

New Policy

  Price per unit

$

104

$

108

  Cost per unit

$

47

$

47

  Unit sales per month

3,240

3,295

Calculate the NPV of the decision to change credit policies. (Do not round intermediate calculations.)

The Harrington Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2.5 percent per period.

Explanation / Answer

Assuming 1 Period is month Current Policy New Policy Price 104 Price 108 Cost 47 Cost 47 Units 3240 Units 3295 NPV Inflow -outflow NPV    200,995.00        184,680.00 Since NPV of new project is higher. Firm should go with new project as per data provided.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.