Question
Engi Sola Corp. manufactures solar engines for tractor trailers. Given the fuel savings available, new orders for 125 units have been made by customers requesting
Engi Sola Corp. manufactures solar engines for tractor trailers. Given the fuel savings available, new orders for 125 units have been made by customers requesting credit. The variable cost is $9,700 per unit, and the credit price is $11,100 each. Credit is extended for one period. The required return is 1.9% per period. If Engi Sola extends credit, it expects that 30% of the customers will be repeat customers and place the same order every period forever, and the remaining customers will be one-time orders.
Calculate the NPV of the decision to grant credit.
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