Question 20.S-TP.2: Credit Where Credit Is Due You are trying to decide whether ...
Credit Where Credit Is Due You are trying to decide whether or not to extend credit to a particular customer. Your variable cost is $15 per unit; the selling price is $22. This customer wants to buy 1,000 units today and pay in 30 days. You think there is a 15 percent chance of default. The required return is 3 percent per 30 days. Should you extend credit? Assume that this is a one-time sale and that the customer will not buy if credit is not extended.
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