# A firm currently makes only cash sales

###### Question:

A firm currently makes only cash sales. I estimates that allowing trade credit on terms of net 30 would increase monthly sales from 200 to 220 units per month. The price per unit is $101 and the cost (in present value terms) is$80. The interest rate is 1 percent per month.
a) Should the firm change its credit policy
B)Would the answer change if 5 percent of all customers will fail to pay their bills
C) what if 5 percent of only new customers fail to paytheir bills? The current customers take advantage of the 30 days of free credit but remain safe credit risks

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