Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. alpha inc. is a wholesaler that sells luxury cars.

Alpha Inc. is a wholesaler that sells luxury cars. A new customer has placed an...

60.1K

Verified Solution

Question

Finance

Alpha Inc. is a wholesaler that sells luxury cars. A new customer has placed an order for six cars. The variable cost is $0.6 million per car, and the credit price is $0.87 million each. Credit is extended for one period. Based on experience, payment for about 1 out of every 200 such orders will be never collected. The discount rate is 2.5 percent per period.

a. If this is a one-time order, should it be filled? Calculate the break-even probability of default in this case.

b. Assuming that customers that do not default will become repeat customers and therefore they will place the same order every period forever. If the repeat customers never default, would the order be filled? Calculate the break-even probability of default in this case.

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Halcyon Lines is considering the purchase of a new bulk carrier for $8.7 million. The forecasted...

Finance
Q

8.20 A long composite cylinder is subjected to the external pressure loading as shown in the...

Mechanical Engineering
Q

Seattle Coffee Limited's bank statement for the month of November 30, 2020 showed a balance per...

Accounting
Q

A uniform steel bar Young s modulus 200 GPa density 7 8 gm cc of...

Physics
Q

charge mass An electron is travelling in east direction and a magnetic field is applied...

Physics
Q

The cost in dollars of manufacturing x items is given by C x x 7x...

Basic Math
Q

utdoor Luggage, Incorporated, makes high-end hard-sided luggage for sports equipment. Data...

Accounting
Q

Cole Inc. owns shares of Marlin Corporation stock classified as an available-for-sale investment. At December...

Accounting
Q

Hull Manufacturing Corp. (HMC), a Canadian company, manufactures instruments used to measure the moisture content...

Accounting
Q

Current Attempt in Progress The following is financial information for three companies: \table[[,Metlock Ltd.,Marx...

Accounting
Q

Water nation is considering purchasing a water park in Atlanta, Georgia for $1,820,000. The new...

Accounting
Q

Christie, Incorporated, has identified an investment project with the following cash flows. a. If the...

Finance