You are trying to attract new customers that you feel could become repeat customers. The average selling price of your products is $69 each

You are trying to attract new customers that you feel could become repeat customers. The average selling price of your products is $69 each with a $41 per unit variable cost. The monthly interest rate is 1.5 percent. Your experience tells you that 8 percent of these customers will never pay their bill. What is the value of a new customer who does not default on his or her bill?    A.  $1,733 B.  $1,867 C.  $2,617 D.  $4,817 E.  $8,867 PV = ($69 - $41)/0.015 = $1,867

73.

You are trying to attract new customers that you feel could become repeat customers. The average price of your product is $619 per unit with a $435 variable cost per unit. The monthly interest rate is 1.8 percent. Your experience tells you that 9 percent of these customers will never pay their bill. Should you offer credit terms of net 30 to attract these potential customers? Why or why not?    A.  yes; because the NPV of extending credit is $8,867 B.  yes; because the NPV of extending credit is $9,787 C.  yes; because the NPV of extending credit is $128 D.  no; because the NPV of extending credit is -$459 E.  It doesn't matter because the NPV of extending credit is zero. NPV = -$435 + {[1 - 0.09] × [($619 - $435)/0.018]} = $8,867

74.	A firm sells 4,500 units of an item each year. The carrying cost per unit is $2.15 and the fixed costs per order are $69. What is the economic order quantity?    A.  374 units B.  421 units C.  497 units D.  537 units E.  623 units EOQ = [(2 × 4,500 × $69)/$2.15]1/2 = 537 units