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1. Crisps has received an order for 10500 bags of potato chips from BigBag. Crisps views BigBag to be a one-time customer. Crisps sells its large bags of potato chips for $1.85 each, and calculates its internal cost for the product at $1.05 each.

Market research estimates that there is a 27% 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.

2. Crisps has received an order for 15000 bags of potato chips from BigBag. Crisps views BigBag to be a long-term customer and believes they will continue to place the same order year after year forever. Crisps sells its large bags of potato chips for $1.90 each, and calculates its internal cost for the product at $1.45 each.

Market research estimates that there is a 37% chance that BigBag will pay in full what it owes. Crisps uses a discount rate of 6.65% for all NPV analysis.

Based on this information, calculate the NPV of this credit decision? $

Place your answer to the nearest dollar. Do not use a Dollar sign or commas within your answer.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92428924

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