A Firm That Makes Only Cash Sales Has the Luxury

Essay

A firm that makes only cash sales has the luxury of no uncollectible receivables at the expense of forgone sales.Does it make financial sense to allow credit sales if doing so would increase sales from 1,000 units monthly to 1,150, at a sales price of $50, and a present value of costs of $39 per unit? Assume that all sales will now be made on credit and that 6% of sales will end up being uncollectible after the 30-day payment period.The opportunity cost of capital is 1% per month.