You Can Make a One-Time Sale If You Will Grant

question 57

Multiple Choice

You can make a one-time sale if you will grant a new customer 30 days to pay.  This customer wants to purchase an item with a sales price of $499 and a variable cost of $287. You estimate the probability of default at 33 percent. The monthly interest rate is .98 percent. Should you grant credit to this customer? Why or why not?

• A) Yes; because the NPV of the potential sale is $33.05
• B) Yes; because the NPV of the potential sale is $44.09
• C) Yes; because the NPV of the potential sale is $13.02
• D) No; because the NPV of the potential sale is −$13.05
• E) No; because the NPV of the potential sale is −$2.65

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Definitions:

Budget Line

The budget line represents the combination of goods and services that a consumer can purchase with a given budget, considering the prices of those goods and services.

Sociology

The scientific study of society, including patterns of social relationships, social interaction, and culture.

Economics

A branch of social science that investigates the decision-making processes of individuals, governments, companies, and countries when distributing limited resources to fulfill their endless desires.

Weekend

The period from Friday evening through Sunday evening, specifically considered a time for leisure and rest from the workweek.