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Problem:

The Branding Iron Company sells its irons for $50 a piece wholesale. Production cost is $40 per iron. There is a 25% chance that wholesaler Q will go bankrupt within the next year. Q orders 1000 irons and asks for six months' credit. Assume that the discount rate is 10% per year, there is no chance of a repeat order, and Q will pay either in full or not at all.

Required:

Calculate the NPV of the order.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91147377

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