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a) What is the present value of a 3-year annuity of $100 if the discount rate is 6 percent?
b) What is the present value of the annuity from part (a) of this question if you have to wait 2 years instead of 1 year for the payment stream to start?
Credit Policy Example: Universal Bed Corporation
Credit Policy. As treasurer of the Universal Bed Corporation, Aristotle Procrustes is worried about his bad debt ratio, which is currently running at 6%. He believes that imposing a more stringent credit policy might reduce sales by 5% and reduce the bad debt ratio to 4%. If the cost of goods sold is 80% of the selling price, should Mr. Procrustes adopt the more stringent policy?