Q.7. ABC Ltd. is an engineering company producing HT Drives. A new customer in the power transmission business has placed an order for eight Hr Drives. The variable cost is 20 lakhs INR per unit and credit price (price when given on credit) is 25 lakhs INR each. Credit is extended for one period and based on historical experience, the probability of default is 10%. The required return is 1.5% per period. If credit is not extended, customer will not buy the product. Assuming that this is a one-time order, should it be filled? What is the breakeven probability of default? [5]