PLEASE SHOW WORK: Travel and Tow Trailers inc. makes small trailers for light-duty towing behind SUVs and pickup trucks. Its trailers typically sell for $3000. Many of its customers have asked for credit terms to aid in purchasing the trailers. The firm's finance department has estimated the following profile for its light-duty trailers and customer base:

ANNUAL SALES: 10,000 TRAILERS

ANNUAL PRODUCTION COST PER TRAILER: $1,500

LOST SALES IF CREDIT NOT PROVIDED: 2,000 TRAILERS

DEFAULT RATE IF ALL CUSTOMERS PURCHASE ON CREDIT: 2%

a) What is the profit if the firm uses cash only policy?

b) What is the profit if they use the credit policy?

c) If they use the credit policy, what is the annual cost of bad debts?

d) What is the maximum they should spend on credit screening?