chapter 20, question 2

.pdf

School

Liberty University *

*We aren’t endorsed by this school

Course

530

Subject

Business

Date

May 11, 2024

Type

pdf

Pages

3

Uploaded by MegaGooseMaster1106 on coursehero.com

Score: 20/20 Points 100 % 5/9/24, 8:38 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlud… 1/3
2. Award: 5 out of 5.00 points 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 $140, and the cost per carton is $85. The unit sales will increase from 1,090 cartons to 1,150 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? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. 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? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign. 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? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. a. Change in total monthly profit $ 1,705.94 b. Change in total monthly profit $ 920.69 c. Change in total monthly profit $ 3,175.86 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 $140, and the cost per carton is $85. The unit sales will increase from 1,090 cartons to 1,150 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? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. 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? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign. 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? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. +/-0.01 $ +/-0.01 $ +/-0.01 $ a. Change in total monthly profit 1,705.94 b. Change in total monthly profit 920.69 c. Change in total monthly profit 3,175.86 5/9/24, 8:38 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlud… 2/3
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help