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What is the expected profit of granting credit

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Reference no: EM132530192

Consider the case of the Cast Iron Company. On each nondelinquent sale, Cast Iron receives revenues with a present value of $1,220 and incurs costs with a present value of $1,000. Cast Iron's costs have increased from $1,000 to $1,070. Assuming that there is no possibility of repeat orders and that the probability of successful collection from the customer is p = 0.97, answer the following.

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

Question 2: What is the break-even probability of collection? (Enter your answer as a percent rounded to 1 decimal place.)

Reference no: EM132530192

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