AboutBrian Thompson Expertise My expertise extends to general management, financial management, corporate govenance and everyday managerial problem solving
Experience I have in excess of 30 years experience in the management of public and private organisations
Expert: Brian Thompson Date: 4/27/2008 Subject: Financial Management
Question I am doing MBA . This is my first year. I have one problem to be solved. here is my question.
A company is curently selling 1,00,000 units of its product ar Rs.50/- each unit.At the current level of production, the cost per unit is Rs.45 , variable cost per unit being Rs.40/-. the company is currently extending one month,s credit to its customers. It is thinking of extending credit period for two months in the expectation that sales will increase by 25 percent. If the required rate of return (before tax) on the firm's investment is 30 percent is the new credit policy is desirable?
Answer if you are doing an MBA you should be able to do the relatively simple calculations associated with this transaction, the answer is the company will profit from the change in circumstances
I suggest you research the meaning of variable cost per unit.
The way to arrive at the answer is to do all the calculations to determine what the structure is both before and after and the difference will give you the answer you seek
please do not submit any assignment questions in the future as I will not answer them
