Solar Engines manufactures solar engines for tractor - trailers. Given the fuel savings available, new orders for 175 units have been made by customers requesting credit. The variable cost is $11, 200 per unit, and the credit price is $13, 750 each. Credit is extended for one period. The required return is 1.7 percent per period. If Solar Engines extends credit, it expects that 35 percent of the customers will be repeat customers and place the same order every period forever and the remaining customers will be one time orders. Calculate the NPV of the decision to grant credit. (Do not round intermediate calculations and round your answer to 2
Solar Engines manufactures solar engines for tractor - trailers. Given the fuel savings available, new orders for 175 units have been made by customers requesting credit. The variable cost is $11, 200 per unit, and the credit price is $13, 750 each. Credit is extended for one period. The required return is 1.7 percent per period. If Solar Engines extends credit, it expects that 35 percent of the customers will be repeat customers and place the same order every period forever and the remaining customers will be one time orders. Calculate the NPV of the decision to grant credit. (Do not round intermediate calculations and round your answer to 2
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Solar Engines manufactures solar engines for tractor - trailers. Given the fuel savings available, new orders for 175 units have been made by customers requesting credit. The variable cost is $11, 200 per unit, and the credit price is $13, 750 each. Credit is extended for one period. The required return is 1.7 percent per period. If Solar Engines extends credit, it expects that 35 percent of the customers will be repeat customers and place the same order every period forever and the remaining customers will be one time orders. 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.)
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