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A credit analyst has received a $10,000 order from a new customer. The cost of filling the order (ie COGS) is $8000 and collection cost
A credit analyst has received a $10,000 order from a new customer. The cost of filling the order (ie COGS) is $8000 and collection cost are $200. The credit analyst notes that COGS will be paid immediately. Further, it is assumed that the customer will repay the trade credit obligation in 60 days. It is also assumed that the collection cost will be incurred in 60 days. If the appropriate discount rate is 8%, what is the NPV of extending credit to the new customer?
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