Alex Is New in Town and Has Asked to Establish

question 157

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

Understand the concept of gross profit and how it is influenced by operating expenses and cost of goods sold.

Comprehend the significance of reporting non-operating income and expenses separately from operating activities.

Identify and categorize different components of stockholders' equity and comprehend disclosure requirements related to shares.

Understand the contributions of the Financial Accounting Standards Board (FASB) in developing generally accepted accounting principles (GAAP).

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Definitions:

Conduct of Parties

The actions, behavior, and decisions of those involved in a legal agreement or dispute, which might influence the outcome.

Agent's Authority

Refers to the scope of power granted to an agent by the principal, allowing the agent to act on behalf of the principal in specific matters.

Principal

In law and finance, the amount of money originally invested or loaned, before interest.

Partner's Liability

The legal responsibility shared by partners in a partnership to cover the business's debts and obligations.