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

question 372

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:

Electrons

Subatomic particles with a negative charge, orbiting the nucleus of an atom and involved in chemical bonding and electricity.

Positive Charge

A type of electric charge, typically carried by protons, that repels other positively charged particles and attracts negatively charged particles.

Negative Charge

An electrical charge that results from having more electrons than protons in an atom or molecule.

Molecule

The smallest unit of a chemical compound that retains its chemical properties, consisting of two or more atoms bonded together.