Should Credit Be Granted to a Customer Wishing to Purchase

question 2

Multiple Choice

Should credit be granted to a customer wishing to purchase a $2,000 item that has been marked-up 50% over cost if the probability of collection is only 65%? Assume all cash flows are discounted to present value.

• A)No; the expected loss is $33.33
• B)No; the expected loss is $150.00
• C)Yes; the expected profit is $33.33
• D)Yes; the expected profit is $150.00 expected profit = .65($2,000 x (50/150)) - .35($2,000 x (100/150))
• = )65($666.67) - .35($1,333.34)
• = $433.34 - $466.67

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Definitions:

Ethics

Moral principles that govern a person's behavior or the conducting of an activity.

Socializing Agents

Entities or individuals that play a significant role in the process of teaching norms, customs, and ideologies within a society.

Developmental Perspective

An approach focusing on how individuals change and grow throughout their lives both physically and psychologically.

Interpretive Perspective

A research approach that seeks to understand the subjective meaning of social phenomena and the ways individuals interpret their world.