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Moreno is the credit manager for the Fabritek, one of the largest textile supplier in the region. He is currently faced with the question of whether to extend $100,000 credit to a potential new customer, a dress manufacturer. Moreno has three categories for the credit-worthiness of a company: poor risk, average risk, and good risk, but he does not know which category fits this potential customer. Experience indicates that 30 percent of companies similar to this dress manufacturer are poor risks, 60 percent are average risks, and 10 percent are good risks. If credit is extended, the expected profit for poor risks is -$30,000, for average risks $15,000, and for good risks $25,000. If credit is not extended, the dress manufacturer will turn to another supplier. Moreno is able to consult a credit-rating organization for a fee of $X per company evaluated. For companies whose actual credit record turns out to fall into each of the three categories, the following table shows the percentages that were given each of the three possible credit evaluations by the credit-rating organization. Actual Credit Record Credit Evaluation Poor Average Good Poor Average Good 50% 40% 10% 40% 50% 10% 20% 40% 40% What is the maximum amount Moreno should pay as a consulting fee for the credit- rating organization?

Moreno is the credit manager for the Fabritek, one of the largest textile supplier in the region. He is currently faced with the question of whether to extend $100,000 credit to a potential new customer, a dress manufacturer. Moreno has three categories for the credit-worthiness of a company: poor risk, average risk, and good risk, but he does not know which category fits this potential customer. Experience indicates that 30 percent of companies similar to this dress manufacturer are poor risks, 60 percent are average risks, and 10 percent are good risks. If credit is extended, the expected profit for poor risks is -$30,000, for average risks $15,000, and for good risks $25,000. If credit is not extended, the dress manufacturer will turn to another supplier. Moreno is able to consult a credit-rating organization for a fee of $X per company evaluated. For companies whose actual credit record turns out to fall into each of the three categories, the following table shows the percentages that were given each of the three possible credit evaluations by the credit-rating organization. Actual Credit Record Credit Evaluation Poor Average Good Poor Average Good 50% 40% 10% 40% 50% 10% 20% 40% 40% What is the maximum amount Moreno should pay as a consulting fee for the credit- rating organization?

Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018
Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018
18th Edition
ISBN:9780079039897
Author:Carter
Publisher:Carter
Chapter10: Statistics
Section10.6: Summarizing Categorical Data
Problem 24PPS
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Moreno is the credit manager for the Fabritek, one of the largest textile supplier in the region. He is currently faced with the question of whether to extend $100,000 credit to a potential new customer, a dress manufacturer. Moreno has three categories for the credit-worthiness of a company: poor risk, average risk, and good risk, but he does not know which category fits this potential customer. Experience indicates that 30 percent of companies similar to this dress manufacturer are poor risks, 60 percent are average risks, and 10 percent are good risks. If credit is extended, the expected profit for poor risks is -$30,000, for average risks $15,000, and for good risks $25,000. If credit is not extended, the dress manufacturer will turn to another supplier. Moreno is able to consult a credit-rating organization for a fee of $X per company evaluated. For companies whose actual credit record turns out to fall into each of the three categories, the following table shows the percentages that were given each of the three possible credit evaluations by the credit-rating organization. Actual Credit Record Credit Evaluation Poor Average Good Poor Average Good 50% 40% 10% 40% 50% 10% 20% 40% 40% What is the maximum amount Moreno should pay as a consulting fee for the credit- rating organization?
Transcribed Image Text:Moreno is the credit manager for the Fabritek, one of the largest textile supplier in the region. He is currently faced with the question of whether to extend $100,000 credit to a potential new customer, a dress manufacturer. Moreno has three categories for the credit-worthiness of a company: poor risk, average risk, and good risk, but he does not know which category fits this potential customer. Experience indicates that 30 percent of companies similar to this dress manufacturer are poor risks, 60 percent are average risks, and 10 percent are good risks. If credit is extended, the expected profit for poor risks is -$30,000, for average risks $15,000, and for good risks $25,000. If credit is not extended, the dress manufacturer will turn to another supplier. Moreno is able to consult a credit-rating organization for a fee of $X per company evaluated. For companies whose actual credit record turns out to fall into each of the three categories, the following table shows the percentages that were given each of the three possible credit evaluations by the credit-rating organization. Actual Credit Record Credit Evaluation Poor Average Good Poor Average Good 50% 40% 10% 40% 50% 10% 20% 40% 40% What is the maximum amount Moreno should pay as a consulting fee for the credit- rating organization?
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