CA Inc. assumes new customers will default 15 percent of the time but if they don't default, they will become repeat customers who always pay their bills. Assume the average sale is $500 with a variable cost of $350, and a monthly required return of 1.75 percent. What is the NPV of extending credit for one month to a new customer? Assume 30 days per month.

CA Inc. assumes new customers will default 15 percent of the time but if they don't default, they will become repeat customers who always pay their bills. Assume the average sale is $500 with a variable cost of $350, and a monthly required return of 1.75 percent. What is the NPV of extending credit for one month to a new customer? Assume 30 days per month.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 32P

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