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Consider the case of the Cast Iron Company. On eachnondelinquent sale, Cast Iron receives revenues with a presentvalue of $1,320 and incurs costs with a present value of $1,000.Cast Iron’s costs have increased from $1,000 to $1,170. Assumingthat there is no possibility of repeat orders and that theprobability of successful collection from the customer isp = 0.85, answer the following.a-1. What is the expected profit of grantingcredit? (Do not round intermediatecalculations.)a-2. Should Cast Iron grant or refusecredit?GrantRefuseb. What is the break-even probability ofcollection? (Enter your answer as a percent rounded to 1decimal place.)
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