Rfs is considering adding a new product line home equity

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RFS is considering adding a new product line, Home Equity Loans, which RFS believes will make the mortgage business more attractive to their customers. RFS research shows they could originate 500 of these loans at $230 each. RFS would have to process a 3 page application, obtain 2 credit referrals from outside credit agencies, do 2.5 hours of loan analysis, and complete a 4 hour closing process, with 85% of applications being closed. RFS believes existing resources in the company can handle the additional application processing and loan analysis work. Using the cost driver rates you developed in part A, compute the estimated incremental and fully loaded profitability of this new line of business for RFS.

Reference no: EM13586271

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