Locust Software sells computer training packages to its business customers at a

Question

Locust Software sells computer training packages to its business customers at a price of $105. The cost of production (in present value terms) is $99. Locust sells its packages on terms of net 30 and estimates that about 8% of all orders will be uncollectible. An order comes in for 20 units. The interest rate is 5% per month. What is the break-even probability of collection? Break-even probability__________% What is the break-even probability of collection in the repeat-sales case? Round your answer to 2 decimal places). Break-even probability ___________%

Explanation / Answer

Locust Software sells computer training packages to its business customers at a price of $101. The cost of production (in present value terms) is $96. Locust sells its packages on terms of net 30 and estimates that about 7 percent of all orders will be uncollectible. An order comes in for 20 units. The interest rate is 1 percent per month.

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