1. a) Zoey Enterprises manufactures solar engines for helicopters. Given the fuel savings available, new orders for 125 units have been made bycustomers requesting credit. The variable cost is $11,400 per unit, and the credit price is $13,000 each. Credit is extended for one period. Therequired return is 1.9 percent per period. If Zoey Enterprises extends credit, it expects that 30 percent of the customers will be repeat customers andplace the same order every period forever, and the remaining customers will place one-time orders. Should credit be extended?2. b) Now, assume that the probability of default is 15 percent. Should the orders be filled now? Assume the number of repeat customers is affected bythe defaults. In other words, 30 percent of the customers who do not default are expected to be repeat customers.

: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…

Answered: 1. a) Zoey Enterprises manufactures…

Marketing

20th Edition

ISBN:9780357033791

Author:Pride, William M

Publisher:Pride, William M

Chapter19: Pricing Concepts

Section: Chapter Questions

Problem 6DRQ

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