What is the expected profit of granting credit

Assignment Help Financial Management

Reference no: EM131837890

Consider the case of the Cast Iron Company. On each nondelinquent sale, Cast Iron receives revenues with a present value of $1,340 and incurs costs with a present value of $1,000. Cast Iron’s costs have increased from $1,000 to $1,190. 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-1. What is the expected profit of granting credit? (Do not round intermediate calculations.)

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

Reference no: EM131837890

Questions Cloud

Identify ways that counselors promote social justice : Question - Identify at least two ways that counselors promote social justice for their clients. In what ways have you seen clients

What will the net gain or loss be to the firm : Dome Metals has credit sales of $270,000 yearly with credit terms of net 90 days, What will the net gain or loss be to the firm if this discount is offered?

Describe an aspect of your development : Describe an aspect of your development that differs from a parent's of grandparent's when he or she was your age.

Describe the historical socioeconomic and cultural contexts : Human development occurs in many contexts. Describe the historical, socioeconomic and cultural contexts of development

What is the expected profit of granting credit : Consider the case of the Cast Iron Company. What is the expected profit of granting credit?

Change in the firm total monthly profits on present value : What will be the change in the firm's total monthly profits on a present value basis under these conditions?

Create strategic plan : Create a strategic plan. Missouri Can Company (A Hypothetical company) The Missouri Can Company (MCC) was a firm with a long and uneven history.

Define how your topic relates to broad field of psychology : The paper must not only describe current trends within your topic area, but you should demonstrate how your topic relates to the broad field of psychology.

What are the main characteristics of born global firms : What are the main characteristics of born global firms? What drivers and causes of globalization have allowed born global firms such as Instagram

User Account

All Pages