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company is currently selling 100,000 units of its product at Rs 50 each unit. At the...

company is currently selling 100,000 units of its product at Rs 50 each unit. At the current level of production, the cost per unit is Rs 45, variable cost per unit is Rs 40. The company is currently extending one month’s credit to its customers. It is thinking of extending credit period to two months in expectation that sales will increase by 25%. If required rate of return (before-tax) on firm’s investment is 30%, is the new credit policy desirable?

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Answer #1

(100,000 unib) C125.000 urits) Pregent | Proposed 1 month 1. Imorth Selo Credit period Sales (50) Soogooo 16,950.000 - Vocostsince tax reate is not given we have calculated net benefit without considering tax.

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