What is expected profit of granting credit

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Reference no: EM131839744

Consider the case of the Cast Iron Company. On each nondelinquent sale, Cast Iron receives revenues with a present value of $1,370 and incurs costs with a present value of $1,000. Cast Iron’s costs have increased from $1,000 to $1,220. Assuming that there is no possibility of repeat orders and that the probability of successful collection from the customer is p = 0.95, answer the following.

a-1. What is the expected profit of granting credit?

Expected profit______ per sale?

b. Should Cast Iron grant or refuse credit? Y or N?

c. What is the break-even probability of collection?(Enter your answer as a percent rounded to 1 decimal place.)

________%

Reference no: EM131839744

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