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Your firm currently makes only cash sales. You estimate that allowing trade credit on terms of...

Your firm currently makes only cash sales. You estimate that allowing trade credit on terms of net 30 would increase monthly sales from 200 to 220 units per month. The price per unit is $101 and the cost (in present value terms) is $80. The interest rate is 1% per month. If the probability of payment is no better than 0.8, what is the expected profit of granting credit? How does the repeat sale affect your credit decision?    

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Oclestion: Sales Price per Unit = $901 Cost Price = $80 Interest Rate=1/ Sales increased from $200 to $220. Probabicity of PaProfit will be - $440040.8 = $3520 The company wile Generate profit if it pa Adopts Credit poeirey only when cue Les * testam

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