Asked by
Ankush Majalgaonkar
on Nov 07, 2024
Verified
A firm in a competitive industry institutes a change in credit policy that allows buyers more advantageous terms. The firm also drops its prices by 5%. Unless ____________, the change will almost certainly be a negative NPV investment.
A) Total costs fall.
B) Most of the seller's costs are variable costs.
C) The seller is planning to offer a cash discount.
D) Sales increase.
E) Customers actually take advantage of the new terms.
NPV Investment
An analysis method used to determine the present value of an investment's expected future cash flows minus the initial investment cost.
Credit Policy
The guidelines a company follows to determine how much credit to extend to customers.
Variable Costs
Costs that change when the quantity of output changes.
- Comprehend the elements that affect a company's credit strategy and their effect on fiscal administration.
Verified Answer
CA
Learning Objectives
- Comprehend the elements that affect a company's credit strategy and their effect on fiscal administration.