Saxon Corporation sells a product for $48 with costs of $33 per unit. Saxon uses a 9% rate of return for all its calculations. The CFO estimates that there is a 20% probability of a prospective new customers seeking credit will go bankrupt within the next 6 months. Customer wishes to place an order for 1,000 units of the product.
A) Extend credit; total benefit of $3,880
B) Extend credit; total benefit of $3,780
C) Extend credit; total benefit of $3,980
D) Extend credit; total benefit of $4,080
Answer: B) Extend credit; total benefit of $3,780
Business
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