Your Company Is Considering Granting Credit to a New Customer

question 171

Multiple Choice

Your company is considering granting credit to a new customer. The price per unit is $165 and the variable cost per unit is $150. The monthly interest rate is 0.8%. The customer will pay in 30 days if
He does not default. If the customer does not default, he will buy one unit every month forever.
What is the break-even default percent?

• A) 3.7%
• B) 8.0%
• C) 61.5%
• D) 88.0%
• E) 92.0%

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