What is the expected profit of granting credit

Reference no: EM132019917

Question: On each nondelinquent sale Cast Iron receives revenues with a present value of $1,320 and incurs costs with a present value of $1,170. Assume there is no possibility of repeat orders and that the probability of successful collection from the customer is p = .85.

a-1. What is the expected profit of granting credit? (A negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Expected profit $ per sale

a-2. Should Cast Iron grant or refuse credit?

Refuse

Grant

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

Break-even probability %

Reference no: EM132019917

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