PLEASE SOLVE FOR THE CHANGE IN TOTAL MONTHLY PROFIT ON PRESENT VALUE BASIS FOR E

Question

PLEASE SOLVE FOR THE CHANGE IN TOTAL MONTHLY PROFIT ON PRESENT VALUE BASIS FOR EACH QUESTION... PLEASE SPECIFY THE ANSWERS FOR A., B., AND C. PLEASE READ QUESTIONS IN ITS ENTIRETY Microbiotics currently sells all of its frozen dinners cash on delivery but believes it can increase sales by offering supermarkets 1 month of free credit. The price per carton is $160, and the cost per carton is $95. The unit sales will increase from 1,110 cartons to 1,170 per month if credit is granted. Assume all customers pay their bills and take full advantage of any credit period offered. a. If the interest rate is 1% per month, what will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Change in total monthly profit $ b. If the interest rate is 1.5% per month, what will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Change in total monthly profit $ c. Assume the interest rate is 1.5% per month but the firm can offer the credit only as a special deal to new customers, while existing customers will continue to pay cash on delivery. What will be the change in the firm's total monthly profits on a present value basis under these conditions? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Explanation / Answer

a)

SP = 160
Cost = 95
Profit = 160-95 = 65/unit

As per Old Terms :
Profit = 1110*65 = 72,150

As per New Terms
Total Revenue = 1170*160 = 187,200
Profit = 65*1170 = 76,050
Loss on account of Interest = 187,200*1%* = 1,872
Net Profit = 76,050 - 1872 = 74,178
Change = 74,178-72,150 = 2,028

b) As per Old Terms :
Profit = 1110*65 = 72,150

As per New Terms
Total Revenue = 1170*160 = 187,200
Profit = 65*1170 = 76,050
Loss on account of Interest = 187,200*1.5%* = 2,808
Net Profit = 76,050 - 2808 = 73,242
Change = 73,242-72,150 = 1,092

c)b) As per Old Terms :
Profit = 1110*65 = 72,150

As per New Terms
Total Revenue = 1170*160 = 187,200
Profit = 65*1170 = 76,050
Loss on account of Interest = ((11170-1110)*160)*1.5%* = 144
Net Profit = 76,050 - 144 = 75,906
Change = 75,906-72,150 = 3,756

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