If you will answer just one question please answer number 6 instead of 5, and if you can answer the following ones numbers 7 and 8 also I would appreciate that a lot, the only reason I leave the question 5 on the post is because you need it to understand the question 6 which is the principle question of this post.

5. A seller is considering extending a trade credit to an existing customer that buys on cash terms. The customer has just placed a sales order (cash terms) for immediate delivery of 100 units at a sales price per unit of $50. The customer states that they will increase their sales order by 5% if they receive a 30-day credit period. Variable costs are $45 per unit and involve an immediate cash outflow. If the seller has an annual opportunity cost rate of 7.3%, what is the NPV of extending credit to the customer?

6. The seller from problem 5 would now like to incorporate the probability of default in the NPV of extending credit. Recalculate the NPV of extending credit assuming a 5% probability of default.

7. Interpret credit terms of 1/5 net 45:

8. What are the costs of extending trade credit?