Question
airs pares is a wholesaler stocks engine components and test, equipment for the commercial aircraft industry. a new customer has placed an order for eight
airs pares is a wholesaler stocks engine components and test, equipment for the commercial aircraft industry. a new customer has placed an order for eight high-by pass turbine engine which increase fuel economy. variable cost is 2.4 million percent and the credit is 2.725 million each credit is extended for one period. and based on historical experience, payment for about 1 out of every 400 such orders is never collected. the required return is 2.7 percent period. the customer will not buy if credit is not extended .A) what is the NPV per engine purchased on credit? B) what is the break even probability of default in part ( a) suppose that customers who don't default become repeat customer and place the same order every period for ever. further assume that repeat customer never default. what is the NPV per engine purchased credit on credit? c)Assuming the customer become a repeat customer, what is the break-even probability of default?
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