What Credit Decision Is Appropriate for a Potential Customer That

question 107

Multiple Choice

What credit decision is appropriate for a potential customer that offers an 80% chance of paying on a $10,000 (present value) sale that has an 80% (present value) cost?

• A) Grant credit since expected profit is $3,200.
• B) Grant credit since expected profit is $800.
• C) Refuse credit since expected profit is zero.
• D) Refuse credit since expected loss is $3,000.