Your Current Sales Consist of 40 Units Per Month at a Price

Multiple Choice

Your current sales consist of 40 units per month at a price of $125 a unit. You are weighing the pros and cons of switching to a net 30 credit policy from your current cash only policy. If you decide to switch your credit policy you also plan to increase the sales price to $139 a unit. If you make the switch you do not expect your total monthly sales to change but you do expect a 1 percent default rate. The monthly interest rate is 1.5 percent. What is the net present value of the proposed credit policy switch?

A) $26,845
B) $27,002
C) $28,778
D) $28,619
E) $28,909