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will rate Problem 28-22 Evaluating Credit Policy Solar Engines manufactures solar engines for tractor-trailers. Given the fuel savings available, new orders for 185 units have
will rate
Problem 28-22 Evaluating Credit Policy Solar Engines manufactures solar engines for tractor-trailers. Given the fuel savings available, new orders for 185 units have been made by customers requesting credit. The variable cost is $11,600 per unit and the credit price is $14,250 each. Credit is, extended for one period. The required return is 1.9 percent per period and the probability of default is 15 percent. Assume the number of repeat customers is affected by the defaults. In other words, 30 percent of the customers who do not default are expected to be repeat customers. W Calculate the NPV of the decision to grant credit. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPVStep by Step Solution
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