Your company is considering granting credit to a new customer. The price per unit is $165 and the variable cost per unit is $150. The chance of default is 8% and the monthly interest rate is 0.8%. The customer will pay in 30 days if they do not default. If the customer does not default, they will buy one unit every month forever. What is the NPV of granting credit?
A) -$17,025
B) -$133
C) $1,147
D) $1,575
E) $1,725

Question

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The Answer of Your company is considering granting credit to a new customer. The price per unit is $165 and the variable cost per unit is $150. The chance of default is 8% and the monthly interest rate is 0.8%. The customer will pay in 30 days if they do not default. If the customer does not default, they will buy one unit every month forever. What is the NPV of granting credit?
A) -$17,025
B) -$133
C) $1,147
D) $1,575
E) $1,725

Your Company Is Considering Granting Credit to a New Customer