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Credit Analysis [ LO 2 ] Consider the following information about two alternative credit strategies: The higher cost per unit reflects the expense associated with
Credit Analysis LO Consider the following information about two
alternative credit strategies:
The higher cost per unit reflects the expense associated with credit orders,
and the higher price per unit reflects the existence of a cash discount. The
credit period will be days, and the cost of debt is percent per month.
a Based on this information, should credit be granted?
b In part a what does the credit price per unit have to be to break even?
c In part a suppose we can obtain a credit report for $ per customer.
Assuming that each customer buys one unit and that the credit report
correctly identifies all customers who will not pay, should creit be extended?
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