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5 . The seller from problem 3 would not like to incorporate the probability of default in the NPV of extending credit. Recalculate the NPV

5 .

The seller from problem

3

would not like to incorporate the probability of default in the NPV of extending credit. Recalculate the NPV extedning credit assuming

5

percent probability of default. further calculate the maximum default probability at which the seller is indifferent between extending credit or continuing to sell on cash terms.

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