Assume that an mnc operating in china currently sells 1500, Ask an Expert

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Assume that an MNC operating in China currently sells 1,500 units of a product each month at a price in yuans (CNY) of 4,000 and has a profit margin of 20 percent. Currently the customers take cash delivery. The firm is considering a new pricing structure that requires customers to choose between cash discounts and credit. The firm wants to offer a price of CNY 4,100 with a “ 3/ 15 net 60” deal. The firm estimates that its sales would increase by 15 percent and that half of its customers would take the cash discount option. The firm faces a discount rate of 10 percent for CNY cash flows (annual compounding). What is the NPV of selling 1, 725 units under the proposed discount/ credit terms) if you consider that 5 percent of credit takers default?

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Financial Management, Finance

Category:- Financial Management
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