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Management at Firm X is considering switching from terms of cash only sales to trade credit...

Management at Firm X is considering switching from terms of cash only sales to trade credit terms of net 30 days, in an effort to increase sales. The table below shows projected financial information for the proposed trade credit terms and current cash terms. Based on this information, calculate the Trade Credit Value Added associated with the change in trade credit policy and make a recommendation. Assume that the first transaction would occur today, followed by monthly sales in perpetuity. The required monthly return is 1%.

new policy current policy
price per unit 340 340
cost per unit 260 260
unit sale per month 1850 1800

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago
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