On each nondelinquent sale Cast Iron receives revenues with a present value of $1,250 and incurs costs with a present value of $1,100. Assume there is no possibility of repeat orders and that the probability of successful collection from the customer is p = .98.
a-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.)
Expected profit $ per sale
a-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 decimal place.)
Break-even probability %