Mike 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 $4,999. Your variable cost for that equipment is $3,850 and your monthly interest rate is 1.5 percent. You feel that Mike could become a regular customer if you grant him 30 days credit. You also feel that the probability of default is only 5 percent. What would be the net present value of this decision?
A) $66,667
B) $68,920
C) $69,002
D) $69,234
E) $69,399

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The Answer of Mike 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 $4,999. Your variable cost for that equipment is $3,850 and your monthly interest rate is 1.5 percent. You feel that Mike could become a regular customer if you grant him 30 days credit. You also feel that the probability of default is only 5 percent. What would be the net present value of this decision?
A) $66,667
B) $68,920
C) $69,002
D) $69,234
E) $69,399

Mike Is New in Town and Has Asked to Establish