You may attempt this question 3 more times for credit Crisps has received an ord

Question

You may attempt this question 3 more times for credit Crisps has received an order for 14000 bags of potato chips from BigBag. Crisps views BigBag to be a one-time customer. Crisps sells its large bags of potato chips for $2.35 each, and calculates its internal cost for the product at $0.95 each. Market research estimates that there is a 32% chance that BigBag will pay in full what it owes Based on this information, what is the NPV to Crisps of offering credit to BigBag? Place your answer to the nearest dollar. Do not include a dollar sign or comma.

Explanation / Answer

Cost of order = 14000 bags x $0.95 per bag = $13300

Expected inflow = 14000 bags x $2.35 per bag x 32% = $10528

NPV = 10528 - 13300 = (-)2772

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