Homework SourseThe Corporation is considering a change in its cashonly poli
The Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2 percent per period. Based on the following information, what is the break-even price per unit that should be charged under the new credit policy?
| The Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2 percent per period. Based on the following information, what is the break-even price per unit that should be charged under the new credit policy? |
Solution
At breakeven ,profit under both policy will be equal.
Profit under current policy =Profit under new policy
4700 [ 88-48 ] = 4900[P-48]
188000 = 4900[P-48]
188000/4900 = P-48
P= 38.37+48
= $ 86.37
price = 86.37
