Your Company Is Considering Granting Credit to a New Customer

question 68

Multiple Choice

Your company is considering granting credit to a new customer. The price per unit is $165 and the variable cost per unit is $150. The chance of default is 8% and the monthly interest rate is 0.8%. The customer will pay in 30 days if they do not default. If the customer does not default, they will buy one unit every month forever. What is the NPV of granting credit?

• A) -$17,025
• B) -$133
• C) $1,147
• D) $1,575
• E) $1,725

---

Definitions:

Social Audit

An evaluation of a company's social responsibility and its impact on society and the environment.

Cause Marketing

A marketing strategy where a non-profit entity and a for-profit company collaborate for shared advantages.

Charitable Contributions

Voluntary donations made by individuals or organizations to nonprofit entities as a form of social responsibility.

Green Marketing

The promotion of environmentally friendly products and practices to gain a competitive edge in the market.