What would be the net present value of this decision

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Reference no: EM131520621

Milo's Machining is a new business in town and the company has asked to establish credit with your firm. Milo would like to buy some equipment today at a cost of $525,632. Your variable cost for that equipment is $392,128 and your monthly interest rate is 2.25 percent. You feel that the company could become a regular customer if you grant 30 days credit. You think that the probability of default is 25 percent. What would be the net present value of this decision? Beyond your calculations what are two other things that should be considered in making this decision?

Reference no: EM131520621

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