Cast Iron Company, on each non-delinquent sale, receives revenues with a present

Question

Cast Iron Company, on each non-delinquent sale, receives revenues with a present value of $1,230 and incurs with a value of $1,065. Cast Iron has been asked to extend credit to a new customer. You can find little information on the firm, and you believe that the probability of payment is no better than 0.77. But if the payment is made, the probability that the customer will pay for the second order is 0.94. It costs $15.25 to determine whether a customer has been a prompt or slow payer in the past.

Calculate the minimum probability at which credit can be extended. (round answer 2 decimal places)

Explanation / Answer

Probability of First Payment = 0.77

Probability of Second Order Payment = 0.94

Minimum Probabilty at which Credit Can be extended = Probability of First Payment * Probabilty of Second Payment

= 0.77 * 0.94 = 0.72

Minimum Probabilty at which credit can be extended is 0.72

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.