On each nondelinquent sale Cast Iron receives revenues with a present value of $1,300 and incurs costs with a present value of $1,150. Assume there is no possibility of repeat orders and that the probability of successful collection from the customer is p = .96.

a-1.	What is the expected profit of granting credit? (A negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Expected profit

$ per sale

a-2.

Should Cast Iron grant or refuse credit?

	Grant
	Refuse

b.	What is the break-even probability of collection? (Enter your answer as a percent rounded to 1 decimal place.)

Break-even probability

%