Group 

1) You are currently selling 48 units a month at a price of $199 a unit. Your variable cost of
each unit is $87. If you switch from your current cash sales only policy to a net 30 policy you
think your sales will increase to a total of 55 units per month. The monthly interest rate is 1.2
percent. What is the present value of this switch using the accounts receivable approach?

Answer

Calculation of Net Present Value of the proposed switch using the accounts receivable approach:

Present Value = {(Additional Revenue from sale of Additional units) - [(Existing Sales Revenue
+ Additional cost on Additional units) * Monthly Interest Rate]} / Discounting Rate

Interest rate is being used as discounting rate

Present Value = {[(199 - 87) * 55] - [9552 + (87 * 55)] * 0.012} / 0.012
= {[6160] - [(9552 +4785)] * 0.012} / 0.012
= {6160 – 172.044} / 0.017
= 5987.956 / 0.017
= $ 352232.7059 or $ 352233

2) Discuss government roles in improving credit policy from the articles Credit Policies, Lessons
from East Asia 

According to (Vittas and Cho, 1995) Governments had the role of effective monitoring
and placing mechanisms that would impact credit policies that were dependent on economical
factors such as supportive environment, coordination, and monitoring.

Governments also help approve securities such as the ones in India, where commercial
banks had 38% of securities deposited in the government and that helped in investment and
increase in deposits. According to (Vittas and Cho, 1995) Governments have also helped
countries such as Japan with small and medium firms, to an extent where directing credit is given
when the risk of some projects is too high. The Japanese government had also reconstructed and
allocated fund in between 1945-1955 which had a significant impact later when trying to regulate
and intervening between sectors. Tools where used such as taxation, subsidies, and
infrastructural development to be used as policy instruments or even a part of a policy mix.
 In Korea, the government had an evolution of policies where at the start of 1960, it
helped in strengthening interest rates and increase of deposits. According to ( Vittas and Cho,
1995) Later, due to the intentions of reducing policy interventions in credit markets they have
been trying to get out of an intervention cycle because of politics. Thanks to agreement of some
credit policies later, there was increase in effectiveness in reducing cost of funds and rapid
expansion in different sectors. The government had later controlled financing with strength and
this has led to establishment of implicit government-industry-bank co-insurance scheme. If this
had not happened, then Korea would not have been able to establish large industrial firms.
Thanks to government credit policies, it became an important factor, such as for the elaboration
of industrialization of Korea.

References:

1. Vittas, D., & Cho, Y. (1995, April/May). Credit Policies. Retrieved November 22, 2020,
from https://books.google.com.bh/books/about/Credit_Policies.html?id=fKwGnBsK8lsC