QUESTION 4

A credit analyst has received a $350,000 order from a new customer. The cost of filling the order (i.e., COGS) is $20,000 and collection costs are $500. The credit analyst notes that the COGS will be paid immediately. Further, it is assumed that the customer will repay the trade credit obligation in 90 days. It is also assumed that the collection costs will be incurred in 90 days. If the appropriate discount rate is 10%, what is the NPV of extending credit to the new customer?

	a.	$245,000
	b.	$321,090
	c.	235,229
	d.	None of the above

QUESTION 5

In the above question, how would NPV change if the repayment period was 45 days instead of 90 days?

	a.	decrease by $5,320
	b.	increase by $5,320
	c.	increase by $4,154
	d.	decrease by $4,154