Question
Green Energy manufactures solar batteries for electric bicycles. Given the advantages in terms of savings new orders for 125 units have been made but only
Green Energy manufactures solar batteries for electric bicycles. Given the advantages in terms of savings new orders for 125 units have been made but only if a one month of credit is conceded. The variable cost is $12,400 per unit, and the (credit) price is $13,000 each. If Green Energy gives credit to the new costumers, it expects that 20 percent of the customers will be repeat customers and place the same order every month forever, and the remaining customers will place one-time orders. Assuming that the cost of capital of Green Energy is equal to 1.0% per months. Should credit be given?
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