Alex Is New in Town and Has Asked to Establish

question 362

Multiple Choice

Alex is new in town and has asked to establish credit with your firm. He would like to buy some lawn equipment today at a cost of $2,495. Your variable cost for that equipment is $1,875 and your monthly interest rate is 1.3 percent. You feel that Alex could become a regular customer if you grant him 30 days credit. You also feel that the probability of default is only 3 percent. What is the net present value of this decision?

• A) $21,406
• B) $22,009
• C) $38,112
• D) $44,387
• E) $47,108

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Definitions:

Competitive Advantage

A unique attribute or combination of attributes that allows a company to outperform its competitors, adding value to its products or services in the market.

Competitive Advantage

A situation where a company has an edge over its competitors, allowing it to generate greater sales or margins and retain more customers.

Brand Recognition

The extent to which a consumer can correctly identify a brand through its attributes and visuals, distinguishing it from competitors.

Core Values

Fundamental beliefs or guiding principles that shape an organization's culture and decision-making, influencing how it conducts business and interacts with stakeholders.