Please help I only need the answer to question C, it is greatly appreciated and I will kindly upvote! Consider the case of the Cast Iron Company. On each nondelinquent sale, Cast Iron receives revenues with a present value of $1,380 and incurs costs with a present value of $1,000. Cast Iron’s costs have increased from $1,000 to $1,230. Assuming that there is no possibility of repeat orders and that the probability of successful collection from the customer is p = 0.85, answer the following. a. What is the expected profit of granting credit? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 1 decimal place. b. Should Cast Iron grant or refuse credit? c. What is the break-even probability of collection?
Please help I only need the answer to question C, it is greatly appreciated and I will kindly upvote!
Consider the case of the Cast Iron Company. On each nondelinquent sale, Cast Iron receives revenues with a present value of $1,380 and incurs costs with a present value of $1,000. Cast Iron’s costs have increased from $1,000 to $1,230. Assuming that there is no possibility of repeat orders and that the probability of successful collection from the customer is p = 0.85, answer the following.
a. What is the expected profit of granting credit?
Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 1 decimal place.
b. Should Cast Iron grant or refuse credit?
c. What is the break-even probability of collection?
Note: Enter your answer as a percent rounded to 1 decimal place.
Step by step
Solved in 3 steps
