A. Your company is considering whether to extend 60 day terms on a credit sale to a major customer. The sale is for $10,000. It typically costs you $0.75 for each dollar of sales. It will cost $1,000 to check the customers credit and about $1,000 in administrative costs for collection. Your companys annual WACC is 13%, and you expect the customer to pay in exactly 60 days. What is the NPV of extending this credit sale?

B. What is the NPV to Josie (an entrepreneur) of adding a customer that plans to buy $1,000 in goods that will cost Josie $400? The operating cycle for this customer is 86 days, but Josie can wait to pay her suppliers for 30 days. Given the risk of this opportunity, Josie uses an annual discount rate of 18%.

C. What is the value to Josie if she added one customer per day in perpetuity, with the same expected values as question 14?