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The default rate of Don's new customers has been running at 25 percent. The average sale for each new customer amounts to $750, generating a
The default rate of Don's new customers has been running at 25 percent. The average sale for each new customer amounts to $750, generating a present value of profit of $300 and a 25 percent chance of a second order next year. The default rate on second orders is only 5 percent. If the interest rate is 5 percent, what is the expected profit from each new customer?
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$178.13
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$161.72
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$159.38
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$243.75
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