Question
Solar Charge is a company that manufactures solar panels for use in residential buildings. It has received an unsolicited request from a foreign buyer, willing
Solar Charge is a company that manufactures solar panels for use in residential buildings. It has received an unsolicited request from a foreign buyer, willing to buy 100,000 units at $1200 each (Ex-works). It will take a year to fulfill the order and the purchaser will pay the entire amount owing when a shipment is completed. The cost of producing each unit is $1000 and the company would have to take out a loan to finance the production of the order. Its cost of capital is 10 percent per annum. The manager of the export office recommends that the company respond favourably to the foreign request, especially since it sells the panels on the domestic market for only $1100 per unit. What does the finance department say?
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