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

Question

Quizplus · Accepted Answer

The NPV is calculated by considering the profit per unit (selling price minus variable cost), adjusting for the default rate, and discounting for the interest rate over 30 days. The correct NPV is $17,984.

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