When analyzing the NPV of a decision to switch from a cash-only sales policy to a credit policy with an early payment discount,the firm is least apt to consider the:
A)size of the discount.
B)length of the credit period.
C)firm's variable costs.
D)expected change in sales.
E)fixed salaries of the sales force.

Question

Quizplus · Accepted Answer

The fixed salaries of the sales force are not directly related to the cash flows generated by the decision to switch to a credit policy with an early payment discount. Therefore, it is the least likely factor to be considered when analyzing the NPV of the decision. The other factors listed (size of discount, length of credit period, variable costs, and expected change in sales) all have a direct impact on the cash flows and are more relevant to the NPV analysis.

When Analyzing the NPV of a Decision to Switch from a Cash-Only