PLEASE ONLY POST AN ANSWER IF YOU KNOW HOW TO DO THE PROBLEM. 7077.20 IS INCORRECT.
Problem 20-14 Credit Policy Evaluation [LO2]
The Snedecker Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 1.4 percent per period.
Current Policy New Policy Price per unit $ 56 $ 58 Cost per unit $ 32 $ 32 Unit sales per month 2,300 2,425
Calculate the NPV of the decision to change credit policies. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
NPV $
PLEASE ONLY POST AN ANSWER IF YOU KNOW HOW TO DO THE PROBLEM. 7077.20 IS INCORRECT.
Problem 20-14 Credit Policy Evaluation [LO2]
| The Snedecker Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 1.4 percent per period. |
| Current Policy | New Policy | |||||
| Price per unit | $ | 56 | $ | 58 | ||
| Cost per unit | $ | 32 | $ | 32 | ||
| Unit sales per month | 2,300 | 2,425 | ||||
| Calculate the NPV of the decision to change credit policies. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| NPV | $ |
Related questions
Problem 28-17 Break-Even Quantity
| The Harrington Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2.0 percent per period. |
| Current Policy | New Policy | |||||
| Price per unit | $ | 74 | $ | 76 | ||
| Cost per unit | $ | 38 | $ | 38 | ||
| Unit sales per month | 3,200 | ? | ||||
| What is the break-even quantity for the new credit policy? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Happy Times currently has an all-cash credit policy. It is considering making a change in the credit policy by going to terms of net 30 days. Based on the following information, what is the break-even price per unit under the new credit policy? The required return is 0.88 percent per month. (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16)) |
| Current Policy | New Policy | |||||
| Price per unit | $ | 235 | ? | |||
| Cost per unit | $ | 173 | $ | 178 | ||
| Unit sales per month | 1,680 | 1,735 | ||||
| Break-even price | $ |
You are considering a new product launch. The project will cost $1,232,500, have a five-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 310 units per year; price per unit will be $19,300, variable cost per unit will be $15,800, and fixed costs will be $329,000 per year. The required return on the project is 13 percent, and the relevant tax rate is 35 percent.
Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within ±10 percent.
What are the best-case and worst-case values for each of the projections? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)
| Scenario | Unit Sales | Variable Costs | Fixed Costs |
| Base | 310 | $15,800 | $329,000 |
| Best | |||
| Worst | |||
What are the best-case and worst-case OCFs and NPVs with these projections? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
| OCF | NPV | |
| Best-case | $ | $ |
| Worst-case | $ | $ |
What are the base-case OCF and NPV? (Do not round intermediate calculations. Round your OCF answer to the nearest whole number, e.g., 32, and round your NPV answer to 2 decimal places, e.g., 32.16.)
| OCFbase | $ |
| NPVbase | $ |
What are the OCF and NPV with fixed costs of $339,000 per year? (Do not round intermediate calculations. Round your OCF answer to the nearest whole number, e.g., 32, and round your NPV answer to 2 decimal places, e.g., 32.16.)
| OCF | $ |
| NPV | $ |
What is the sensitivity of your base-case NPV to changes in fixed costs? (Enter your answer as a positive value. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
For every dollar FC increases, NPV falls by $_____ .
