no its not

2) A firm is evaluating the following sales opportunity for a new customer: S($175,000) = Projected invoice amount VCR (65% of Sales) - Variable production costs EXP (1% of Sales for each CP after the first one) = Credit and collection costs 1 (10%); (0.10/365) = Annual; daily interest rate Credit Period (Net 45 days) . 2. Given the uncertainly of payment timing, assume the new customer is expected to mirror the firm's historical collection experience (shown below). COLLECTION PERIOD (CP) DSO PAYMENT PROBABILITY 90 Days 120 5% 100% After 90 days, the invoice is turned over to a collection agency that collects, on average, 50% of the invoice one month after the referral and charges a 30% commission on the invoice amount (not the amount collected). Re-calculate the NPV and determine if trade credit should still be offered. Collection PV of Payment Collection Cash Flow at Collection at Probability Costs (EXP) DSO t0 Collection Period Expected NPV Probable NPV (apply prob. %) DSO VCR 1 38 50% 2 53 30% 3 81 15% 120 5% Expected NPV of Credit Extension 100% Re-calculate the NPV using a probability distribution that reflects more uncertainty and risk and determine if trade credit should still be offered. Use 10%, 30%, 25%, and 35%, respectively, for the four CPs. Should trade credit still be offered? Collection PV of Payment Collection Cash Flow at Collection at Probability Costs (EXP) DSO Expected NPV Collection Period Probable NPV apply prob. %). DSO t =0 VCR 1 38 10% 2 53 30% 3 81 25% 120 35% Expected NPV of Credit Extension 100% 2) A firm is evaluating the following sales opportunity for a new customer: S($175,000) = Projected invoice amount VCR (65% of Sales) - Variable production costs EXP (1% of Sales for each CP after the first one) = Credit and collection costs 1 (10%); (0.10/365) = Annual; daily interest rate Credit Period (Net 45 days) . 2. Given the uncertainly of payment timing, assume the new customer is expected to mirror the firm's historical collection experience (shown below). COLLECTION PERIOD (CP) DSO PAYMENT PROBABILITY 90 Days 120 5% 100% After 90 days, the invoice is turned over to a collection agency that collects, on average, 50% of the invoice one month after the referral and charges a 30% commission on the invoice amount (not the amount collected). Re-calculate the NPV and determine if trade credit should still be offered. Collection PV of Payment Collection Cash Flow at Collection at Probability Costs (EXP) DSO t0 Collection Period Expected NPV Probable NPV (apply prob. %) DSO VCR 1 38 50% 2 53 30% 3 81 15% 120 5% Expected NPV of Credit Extension 100% Re-calculate the NPV using a probability distribution that reflects more uncertainty and risk and determine if trade credit should still be offered. Use 10%, 30%, 25%, and 35%, respectively, for the four CPs. Should trade credit still be offered? Collection PV of Payment Collection Cash Flow at Collection at Probability Costs (EXP) DSO Expected NPV Collection Period Probable NPV apply prob. %). DSO t =0 VCR 1 38 10% 2 53 30% 3 81 25% 120 35% Expected NPV of Credit Extension 100%