QUESTION 4 (Continued) Alternative Approach NPVofcash policy=(S 2 51000g-(S 1 5x1 000g =$25⑩00$15000 $10⑩0 NPVofcred it p olicy=(S g+ ($250.99600(S250.99k500 1.015 1.015 25×400$2570 l5⑩00$100$250 (1.015(.015 $100$100$150 S150$60 1.0150.015(1.015 (1.015 $23500+$1463H$1292+$9707$1674$15⑩0 -$1300$259$99$97$143$159$59 $10706 NPV of the cred it policy NPV of the cash policy(by $7 406), therefore adopt the proposed cred it arrangementsAugust 2003 QUESTION 4 (Continued) Alternative Approach ( ) ( ) $100000 $250000- $150000 NP V o f cash p o licy $25 1 0000 - $15 1 0000 = = =   ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) $107406 - $15000- $250- $99- $97- $143- $150- $59 $235000 $14631 $12192 $ 9707 $ 1674- $150000 1 .0 1 5 $60 - $150- 1 .0 1 5 $150 - 1 .0 1 5 $100 - 1 .0 1 5 $100 - - $150000- $15000- $250 1 .0 1 5 $25 7 0 1 .0 1 5 $25 400 1 .0 1 5 $25 0 .9 9 500 1 .0 1 5 $25 0 .9 9 600 NP V o f cred it p o licy $25 9 400 2 3 2 3 = = + + + +  +  +   +   =  + NPV of the credit policy > NPV of the cash policy (by $7 406), therefore adopt the proposed credit arrangements