A firm is evaluating a $100,000 sales opportunity (S) for a new customer. The Variable...
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A firm is evaluating a $100,000 sales opportunity (S) for a new customer. The Variable Cost Ratio (VCR) is 75% of sales. Collection Costs (EXP) are 2.5% of sales per CP beginning with second CP. After 90 days the invoice will be turned over to a collection agency that collects, on average, 75% of the invoice amount earning a 50% commission based on amount collected. The firm's cost of capital is 10%(i). What is the EXPECTED NPV (the last column weighted based on payment probability) for the 61-75 Days CP bucket if the new customer account performs similarly to existing customers? NPV=1+iCPSEXP(S)VCR(S) $14,189 $2,296$5,179$1,774
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