Jomal Corporation Expects to Receive $2,300 Along with Costs of $1,800

question 97

Multiple Choice

Jomal Corporation expects to receive $2,300 along with costs of $1,800 on each non-delinquent sale on credit.The probability of collection is 85%.Determine whether credit should be extended.

• A)Extend credit - net benefit of $155
• B)Extend credit - net benefit of $80
• C)Do not extend credit - net detriment of $155
• D)Do not extend credit - net detriment of $80 p x PV(REV - COST) - (1-p) x PV(COST)

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Definitions:

Significant Influence

The capacity to impact the financial and operating decisions of another entity without having full control over it.

Available-for-Sale Debt Securities

Debt instruments not classified as held-to-maturity or trading securities, reported at fair value with unrealized gains or losses in other comprehensive income.

Exchange Rate

The rate at which one currency can be exchanged for another currency, affecting international trade and investments.

Canadian Dollars

The official currency of Canada, represented by the code CAD in the foreign exchange market.