Problem 31-18 Credit policy Cast Iron Company, on each nondelinquent sale, receives revenues with a present value of $1,220 and incurs costs with a value of $1,010. Cast Iron has been asked to extend credit to a new customer. You can find little information on the firm but you believe that the probability of payment is no better than 0.79 and that there will be a repeat order in one year if payment occurs. If the discount rate is 11%, calculate the minimum probability of payment on the repeat order at which credit can be extended. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. Minimum probability 82.79%

Problem 31-18 Credit policy Cast Iron Company, on each nondelinquent sale, receives revenues with a present value of $1,220 and incurs costs with a value of $1,010. Cast Iron has been asked to extend credit to a new customer. You can find little information on the firm but you believe that the probability of payment is no better than 0.79 and that there will be a repeat order in one year if payment occurs. If the discount rate is 11%, calculate the minimum probability of payment on the repeat order at which credit can be extended. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. Minimum probability 82.79%

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter15: Managing Short-term Assets

Section: Chapter Questions

Problem 11PROB

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