You Are Considering a Temporary Opening of a Kiosk in the Local

question 46

Multiple Choice

You are considering a temporary opening of a kiosk in the local mall. Any sale you make will be a one-time sale. There is only a 45 percent chance that you will collect your money on a credit sale. The product you want to sell has a variable cost of $4.10 and a sales price of $5.75. The monthly interest rate is 1.3 percent. Should you offer people 30 days to pay? Why or why not?

• A) Yes; because you will earn $2.23 on every credit sale you make.
• B) Yes; because you will earn $5.68 on every credit sale you make.
• C) No; because the net present value of the potential sale is -$1.55.
• D) No; because the net present value of the potential sale is -$.98.
• E) It doesn't matter; because the present value of the potential sale is $0.

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Definitions:

SAD

Seasonal Affective Disorder, a type of depression that occurs at a certain time of the year, usually in winter.

Depression

A common and serious medical illness that negatively affects how you feel, the way you think, and how you act, causing feelings of sadness or a loss of interest in activities once enjoyed.

Winter Months

The coldest season of the year in polar and temperate zones, typically marked by short days, long nights, and lower temperatures.

Suprachiasmatic Nucleus

A tiny region in the brain's hypothalamus responsible for controlling circadian rhythms.