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Clearwater Inc. has a new customer default rate of 10%. Each new customer makes $800 purchase on average, and this generates a present value of

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Clearwater Inc. has a new customer default rate of 10%. Each new customer makes $800 purchase on average, and this generates 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.)

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