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Cast Iron Company

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Question

Question:Consider the case of the Cast Iron Company. On each non delinquent sale, Cast Iron

receives revenue with a present value of $1,400 and incurs costs with a present value of $1,000. Cast Iron’s costs have increased from $1,000 to $1,250. Assuming that there is no possibility of repeat orders and that the probability of successful collection from the customers is p=0.85, answer the following:

A) What is the expected profit of granting credit? ( Do not round intermediate calculations).

A-2) Should Cast Iron Grant or refuse credit?

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

 
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