Assume an Average Selling Price of $547 Per Unit, a Variable

question 15

Multiple Choice

Assume an average selling price of $547 per unit, a variable cost per unit of $339, a monthly interest rate of 1.1 percent, and a default rate of 3.1 percent. What is the NPV of extending credit for 30 days to all who are expected to become repeat customers?

• A) $17,984
• B) $19,787
• C) $12,304
• D) $18,662
• E) $13,609

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Definitions:

Population Average

The mean value of a particular characteristic in a specified population, representing a central tendency.

Statistical Significance

Indicates whether the results of a study are likely to be due to chance or are actually significant in terms of supporting a hypothesized effect.

T Value

A statistic calculated in hypothesis testing used to compare the observed difference between two means relative to the variability of the data.

Z-Test

A statistical test used to determine if there is a significant difference between sample and population means.