Finance Quiz

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Finance I Quiz – Last one! Creative Genius (CG) sells science kits for children for $35 and has been doing very well for the last three years. The Vice President of Sales has asked the Credit Manager to review the company’s policies with regards to extending credit. You are given the following information: Currently, CG uses terms of net 30, and the Collections manager indicates that the uncollectible estimate is 4%. The interest rate per month is 1% and the present value of the costs of production are $21. Required: 1. Creative Genius wants to know if it should be extending credit to one-time orders? 2. What is the break-even probability of collections? 3. If Mad Scientist, a new customer, wants to place recurring monthly orders, and their credit check determines that they are not a default risk, should credit be extended? 4. What is the break-even probability of collections for Mad Scientist?

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