3. Collegiate Tuxedo rents apparel throughout the year. They have experienced non-payment by about 15% of...
3. Collegiate Tuxedo rents apparel throughout the year. They have experienced non-payment by about 15% of their customers with an average loss of $200. Collegiate wants to stem their losses by using an instant electronic credit check on the customer. These checks will cost them $7 on each of the 1,000 customers. The opportunity cost is 1.5% for the credit period. Should they pursue the credit check?
Homework Answers
![Average loss per customer # of customers Non-payment percentage NPV of the defaulting customers $200 1,x 15% $30,000 ($200 x 1,000 customers x15%) $7 Cost per proposed check # of customers Total costs associated with the check$7,000 [$7 x 1,000 customers] Savings from not granting discount Net Gain from the proposed check plan $23,000 [S30,000 $7,000] $30,000 [As calculated above] Therefore, they should pursue the credit check](http://img.homeworklib.com/questions/00f19680-c654-11ea-bf24-5d156db8a831.png?x-oss-process=image/resize,w_560)
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3. Collegiate Tuxedo rents apparel throughout the year. They
have experienced non-payment by about 15% of...
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