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Category > Business & Finance Posted 10 Jun 2017 My Price 11.00

C r edit Decision/Repeat Sales.

C r edit Decision/Repeat Sales. Surf City sells its network browsing software for $15 per copy to computer software distributors and allows its customers 1 month to pay their bills. The cost of the software is $10 per copy. The industry is very new and unsettled, however, and the probability that a new customer granted credit will go bankrupt within the next

 

 

 

month is 25 percent. The firm is considering switching to a cash-on-delivery credit policy to reduce its exposure to defaults on trade credit. The discount rate is 1 percent per month.

 

a. Should the firm switch to a cash-on-delivery policy? If it does so, its sales will fall by 40 percent.

b. How would your answer change if a customer which is granted credit and pays its bills can be expected to generate repeat orders with negligible likelihood of default for each of the next 6 months? Similarly, customers which pay cash also will generate on average

6 months of repeat sales

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Homework Helper
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Status NEW Posted 10 Jun 2017 08:06 AM My Price 11.00

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