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The default rate on credit customers is predicted to be 225

Edgeworth Co. has an all-cash policy and sells 50 units per month at $920 a unit. The variable cost is $700 a unit. Should the firm grant a 30days of credit, it expects its sales would rise to 60 units without changes to price or costs per unit. The default rate on credit customers is predicted to be 2.25 percent. The monthly required return is .75 percent. What is the NPV of switching to a credit policy?

A. $266,667

B. 346,333

C. 366,667

D. 240,333

E. 258,778

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Finance Basics: The default rate on credit customers is predicted to be 225

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