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Christian, Inc
Christian, Inc., is considering a change in its cash-only sales policy. The new terms of sale would be net one month. Based on the following information, determine if Christian should proceed or not. The required return is 2.5% per month
| Current Policy | New Policy | |
| Price per unit | $1350 | $1550 |
| Cost per unit | $690 | $690 |
| Unit sales per month | 2170 | 2340 |
Expert Solution
Current PolicyNew PolicyDifferenceUnit Sales per month21702340Sales2,929,5003,627,000697,500(2,170 X1,350)(2,340 X1,550)Cost1,497,3001,614,600117,300(2,170 X690)(2,340 X690)EBIT1,432,2002,012,400580,200Finacial cost90,67590,675(3,627,000*2.5%)Net Income1,432,2001,921,725489,525So, Christian should proceed to change its policy to sale net one month as there is increase in income
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