Mike Is New in Town and Has Asked to Establish

question 137

Multiple Choice

Mike 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 $4,999. Your variable cost for that equipment is $3,850 and your
Monthly interest rate is 1.5 percent. You feel that Mike could become a regular customer if you grant
Him 30 days credit. You also feel that the probability of default is only 5 percent. What would be the
Net present value of this decision?

• A) $66,667
• B) $68,920
• C) $69,002
• D) $69,234
• E) $69,399

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Definitions:

Reproductive Success

The passing of genes onto the next generation in a way that they too can pass those genes on.

Linnaeus

Carl Linnaeus, an 18th-century Swedish botanist, physician, and zoologist who developed a system for naming, ranking, and classifying organisms.

Primates

Primates are an order of mammals that includes humans, apes, monkeys, and prosimians, characterized by complex behaviors, varied forms of locomotion, and a large brain relative to body size.

Hominids

Primates characterized by bipedalism and large brains, including the human lineage and all our immediate ancestors.