Consider the case of the Cast Iron Company. On each nondelinquent sale, Cast Iro

Question

Consider the case of the Cast Iron Company. On each nondelinquent sale, Cast Iron recelves revenues with a present value of $1,230 and Incurs costs with a present value of $1,000. Cast Iron's costs have Increased from $1,000 to $1,080. Assuming that there is no possibility of repeat orders and that the probability or successful collection from the customer is p 0.95, answer the following. 0-1. What is the expected profit of granting credit? (Do not round intermediate ceiculations. Expected proft per sale -2.Should Cast Iron grant or refuse credit? Grant Refuse b. What is the break-even probability of collection? (Enter your answer as a percent rounded to 1 declmal plece.) Break-even probability 96

Explanation / Answer

expected profit

=0.95*1230-1080

=88.50

2.

grant as profit is there on the sale.

3.

break even probablility

=(0+1080)/1230

=87.80%

the above is answer

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