Question: On each nondelinquent sale Cast Iron receives revenues with a present value of $1, 340 and incurs costs with a present value of $1, 190. Assume there is no possibility of repeat orders and that the probability of successful collection from the customer is p = .85.
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.)
2. Should Cast Iron grant or refuse credit?
- Refuse
- Grant
3. What is the break-even probability of collection? (Enter your answer as a percent rounded to 1 decimal place.)