A New Customer Has Placed an Order for a Turbine

question 16

Multiple Choice

A new customer has placed an order for a turbine engine that has a variable cost of $1.12 million per unit and a credit sales price of $1.64 million. Credit is extended for one period. Based on historical experience, payment for about 1 out of every 178 such orders is never collected. The required return is 2.1 percent per period. What is the NPV per unit if this is a one-time order?

• A) $516,407
• B) $421,819
• C) $477,244
• D) $534,290
• E) $351,056

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Definitions:

Unattached Piece

A component or part that is not connected or associated with the main body or structure to which it could belong.

Federal Trade Commission (FTC)

A U.S. federal agency established to protect consumers and promote competition by preventing anticompetitive, deceptive, and unfair business practices.

Holder In Due Course Rule

A legal principle that protects the holder of a negotiable instrument from claims and defenses that could be raised against the original party.

Consumer Credit

A type of credit granted to individuals to purchase goods and services, often used for transactions not involving a business.