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11. The default rate of Demurrage Associates' new customers has been running at 10%. The average sale for each new customer amounts to $800, generating
11. The default rate of Demurrage Associates' new customers has been running at 10%. The average sale for each new customer amounts to $800, generating a present value of profit of $100 and a 40% chance of a second order next year. The default rate on second orders is only 2%. If the interest rate is 9%, what is the expected profit from each new customer? (Examine only the first two periods of potential orders.) (Show calculations to receive full credit)
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