Ali Storage Company Projects 800 Customers Next Year

question 67

Essay

Ali Storage Company projects 800 customers next year.Of these, 600 have been profitable and
have never defaulted on past obligations, while 200 have not been profitable.All of the unprofitable
accounts are expected to default if given credit.Ali can pay £0.40 to an agency that will tell them
whether a customer has been profitable.If Ali's price per unit is £10, and its cost per unit is £6,
should they allow the credit check to be performed? Assume a discount rate of 1%.

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Definitions:

Treasury Bills

Short-term government securities issued at a discount from face value and mature in a year or less, representing a safe and liquid investment option.

Risky Stock

A stock that carries a high level of volatility and uncertain returns, often associated with companies in emerging or highly competitive sectors.