You Are Trying to Attract New Customers That You Feel

question 6

Multiple Choice

You are trying to attract new customers that you feel could become repeat customers.The average price of your product is $619 per unit with a $435 variable cost per unit.The monthly interest rate is 1.8 percent.Your experience tells you that 9 percent of these customers will never pay their bill.Should you offer credit terms of net 30 to attract these potential customers? Why or why not?

• A)yes; because the NPV of extending credit is $8,867
• B)yes; because the NPV of extending credit is $9,787
• C)yes; because the NPV of extending credit is $128
• D)no; because the NPV of extending credit is -$459
• E)It doesn't matter because the NPV of extending credit is zero.