You have the opportunity to make a one-time sale if you will give a new customer 30 days to pay. You suspect there is a 15 percent chance this person will never pay you. The sales price of the item the customer wants to buy is $289. Your variable cost on that item is $156 and your monthly interest rate is 1.75 percent. Should you grant credit to this customer? Why or why not?

Question

Quizplus · Accepted Answer

NPV = -$156 + {[1 - 0.15] F1F1F1S1F1F1F10 [$289/(1 + 0.0175)]} = $85.43

You Have the Opportunity to Make a One-Time Sale If