Your Current Sales Consist of 55 Units Per Month at a Price

Multiple Choice

Your current sales consist of 55 units per month at a price of $96 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 credit sales price to $100 a unit. The cash price will remain at $96. If you make the switch you do not expect your total monthly sales to change but you do expect a 2 percent default rate. The monthly interest rate is 1 percent. What is the net present value of the proposed credit policy switch?

A) $5,280
B) $5,440
C) $5,720
D) $5,890
E) $5,910