Xian Corporation Predicts That If a Customer Pays on the First

question 68

Multiple Choice

Xian Corporation predicts that if a customer pays on the first sale, it is assured that it is a reliable customer.As such, it expects that customer to generate a net profit of $700 per year for 10 years.Ajax calculates present value with a 9% rate of return.There is a 70% probability that Ajax will secure a reliable customer.However, if the customer defaults, Ajax will have to incur a loss of $800.Determine the expected benefit if credit is granted.

• A)$2,804
• B)$2,904
• C)$3,004
• D)$3,104 Present value of $700 profit for 10 years at 9% = $4,492
• P x PV(REV - COST) - (1-p) x PV(COST)

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Definitions:

Pedal A Tricycle

The act of operating a three-wheeled vehicle using foot pedals to propel it forward.

Rough-And-Tumble

A form of play that involves physical activities such as running, tumbling, and play-fighting, often seen among children and believed to be important for social development.

Large Muscle Groups

The collections of larger muscles in the body that contribute to major movements and activities, such as those in the legs, abdomen, and chest.

Small Muscle Groups

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