A seller is considering extending a trade credit to an existing customer that buys on cash terms. The customer has just placed a sales order (cash terms) for immediate delivery of 2,000 units at sales price per unit of 10$ the customer states that they will. Increase their sales order by 5% if they receive a 30-day credit period variable cost are $6 per unit and involve an immediate cash outflow. If the seller has an. Annual opportunity cost rate of 8%, what is the NPV of extending credit to the customer?

The seller would like to incorporate the probability of default in the NPV of extending credit. Recalculate the NPV of extending credit assuming a 8% probability of default.