A seller is considering extending 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 100 units at a sales price per unit of $20. The customer states that they will increase their sales order by 10 units if they receive a 60-day credit period. Variable costs are $5 per unit and involve an immediate cash outflow. The seller believes that there is a 2% probability that the customer will default on the trade credit obligation. If the seller has an annual opportunity cost rate of 3.65%, what is the NPV of extending credit to the customer?

Select one:

a. -$93.14

b. $93.14

c. $1593.14

d. $1,606.00