You are considering renting a kiosk in the local mall for a period of three months.Any sale you make will be a one-time sale.There is only a 79 percent chance you will collect payment on a credit sale.The product you want to sell has a variable cost of $3.88 and a sales price of $4.99.The monthly interest rate is 1.5 percent.Should you offer people 30 days to pay? Why or why not?
A)yes; because the NPV of a credit sale is $0.09.
B)yes; because the NPV of a credit sale is $0.03.
C)no; because the NPV of a credit sale is -$0.08.
D)no; because the NPV of a credit sale is -$0.02.
E)It doesn't matter because the NPV of a credit sale is approximately zero.

Question

Quizplus · Accepted Answer

NPV = -$3.88 + {0.79 × [$4.99/(1 + 0.015)]} = $0

You Are Considering Renting a Kiosk in the Local Mall