You Have the Opportunity to Make a One-Time Sale If

question 185

Multiple Choice

You have the opportunity to make a one-time sale if you will give a new customer 30 days to pay. You suspect there is a 20 percent chance this person will never pay you. The sales price of the item the customer wants to buy is $136. Your variable cost on that item is $94 and your monthly interest rate is 2.5 percent. Should you grant credit to this customer? Why or why not?

• A) Yes; because the net present value of the potential sale is $12.
• B) Yes; because the net present value of the potential sale is $39.
• C) No; because the net present value of the potential sale is -$44.
• D) No; because the net present value of the potential sale is -$2.
• E) It doesn't matter; because the NPV of the potential sale is zero.

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Definitions:

Personal Adequacy

A sense of self-sufficiency, competence, and confidence in one's abilities and qualities.

Independence

The state or quality of being self-reliant and free from outside control or support in one's actions and decisions.

Silence

The absence of any sound or noise; it can also refer to the practice of refraining from speaking as a form of communication or as a meditative technique.

Reflection

The process of introspectively considering one's experiences, actions, and feelings to gain insights or understandings.