What is the probability at the equilibrium point

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Question - Silicon Wafers, Inc. (SWI) is deliberating whether or not to extend credit to a specific customer. SWI's products, used primarily in semiconductor manufacturing, today sell for $ 1,140 per unit. The variable cost is $ 760 per unit. The order under study is for 15 units today; payment is promised in 30 days.

a) If there is a 20% probability of default, must SWI fulfill the order? The required yield is 2% per month. This is a one-time sale and the customer will not make the purchase without credit.

b) What is the probability at the equilibrium point in part (a)?

c) This part is less easy. In general terms, how do you think your answer to part (a) would be affected if the customer bought the merchandise in cash if credit is denied? The cash price is $ 1,090 per unit.

Reference no: EM132933687

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