Question
Arthur Munoz is a credit manager at the Savings and Loan Company, and wishes to apply NPV analysis to a recently received order. The company's
Arthur Munoz is a credit manager at the Savings and Loan Company, and wishes to apply NPV analysis to a recently received order. The company's credit terms are net 45 days and its opportunity cost of funds is 12%. The dollar amount of the order is $10,000 and he finds out through the cost-accounting department that the variable costs relate to 93% of sales and incremental credit administration and collection costs are 2% of sales. Assuming the customer will pay according to the credit terms, with perfect certainty, should the order be accepted?
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