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:

Partnership Assets

All forms of property, including tangible and intangible items, owned by a partnership entity and used in the operation of its business.

Solvent Partner

A partner in a business who has the ability to pay all their debts.

Deficit Balance

A situation where liabilities exceed assets in accounting, indicating a negative balance.

Predistribution Plan

A strategy aimed at addressing income inequality through policy measures affecting the market distribution of income before taxes and transfers, rather than by adjusting after-tax incomes.