Alex is new in town and has asked to establish credit with your firm. He would like to buy some lawn equipment today at a cost of $2,495. Your variable cost for that equipment is $1,875 and your monthly interest rate is 1.3 percent. You feel that Alex could become a regular customer if you grant him 30 days credit. You also feel that the probability of default is only 3 percent. What is the net present value of this decision?
A) $21,406
B) $22,009
C) $38,112
D) $44,387
E) $47,108

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The Answer of Alex is new in town and has asked to establish credit with your firm. He would like to buy some lawn equipment today at a cost of $2,495. Your variable cost for that equipment is $1,875 and your monthly interest rate is 1.3 percent. You feel that Alex could become a regular customer if you grant him 30 days credit. You also feel that the probability of default is only 3 percent. What is the net present value of this decision?
A) $21,406
B) $22,009
C) $38,112
D) $44,387
E) $47,108

Alex Is New in Town and Has Asked to Establish