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Photon Corporation has a client who wants to purchase $50,000 of goods on credit. Photon thinks that the client has a 97% probability of paying
Photon Corporation has a client who wants to purchase $50,000 of goods on credit. Photon thinks that the client has a 97% probability of paying the $50,000 in 3 months and a 3% chance of a complete default (paying no cash at all). Assume an investment of 85% of the amount, made at the time of the sale, and a required return of 10% APY. What is the NPV of granting credit?
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Solution To calculate the NPV of granting credit we need to consider the following factors 1 The amo...
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Taxes And Business Strategy A Planning Approach
Authors: Myron Scholes, Mark Wolfson, Merle Erickson, Michelle Hanlon
5th Edition
132752670, 978-0132752671
