Determine the number of months

Assignment Help Business Management

Reference no: EM131163555

Collecting Credit Card Debt A bank offers a credit card that can be used in various locations. The bank's analysts believe that the percentage P of accounts receivable collected by t months after credit is issued increases at a decreasing rate. Historical data suggest the following function:

P = 0.9[1 - exp(-0.6t)]

The average credit issued in any one month is $125 million, and historical experience suggests that for new credit issued in any month, collection efforts cost $1 million per month.

(a) Determine the number of months that collection efforts should be continued if the objective is to maximize the net collections (dollars collected minus collection costs). Allow for fractional months.

(b) Under the optimal policy in (a), what percentage of accounts receivable should be collected?

Reference no: EM131163555

Questions Cloud

Write essay on one of the term integrity honor pride and joy : Write a 500 word definition essay on one of the terms or concepts from the list provided below. Use other modes of writing, such as description, comparison and contrast, and persuasion.

What recommendations can you provide to shawn : What recommendations can you provide to Shawn and his team to help prepare them for anticipated problems and unanticipated problems

What is division of labor society : What is division of labor society and how does it give rise to a science like economics? Name and explain two ways that the division of labor increases the productive capability of an economic system.

Discuss potential threats to internal validity posed : Discuss potential threats to internal validity posed and Describe two ways to deal with the threats

Determine the number of months : Determine the number of months that collection efforts should be continued if the objective is to maximize the net collections.

Fixed cost or variable cost for the firm in the short-run : For each of the following costs, decide whether or not it is a fixed cost or a variable cost for the firm in the short-run. Provide a brief argument for your classification of the cost. A one-year lease on the building in which the building is locate..

How does corporal punishment align with any of management : How does corporal punishment align with any of the management models presented in our text? Be sure to provide reasoning for your response.

Identify critical to quality performance characteristics : For each of these survey questions, identify two critical to quality (CTQ) performance characteristics for each survey question and discuss why they are important to customer satisfaction

Create an accurate definition : When strung together, create an accurate definition. Canada's Nominal Gross Domestic Product (GDP) can be defined as: a.sold on the black market by the residents of Canada. b.produced by Canadian\'s located in non-Canadian countries. c.produced withi..

User Account

All Pages