Question
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
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?
Step by Step Solution
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Step: 1
To calculate the expected profit from each new customer we need to consider the probabilities ...
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Operations Management in the Supply Chain Decisions and Cases
Authors: Roger Schroeder, M. Johnny Rungtusanatham, Susan Goldstein
6th edition
73525243, 978-0073525242
