Your company currently sells its product with a 1% discount to customers who can pay...
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Your company currently sells its product with a 1% discount to customers who can pay cash immediately. Otherwise the full price is due within 30 days. Half of your customers take advantage of the discount. You are considering dropping the discount so that your new terms would just be net 30. If you do that, you expect to lose some customers who were only willing to pay the discounted price, but the rest will simply switch to taking the full 30 days to pay. Altogether, you estimate that you will sell 5 fewer units per month (compared to 520 units currently). Your variable cost per unit is $65 and your price per unit is $110. What is the monthly required return so that you are willing to switch your policy?
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