The Credit Decision
w Based on the probability of payoffs, the expected
profit can be expressed as:w The break even probability of collection is:
p x PV(Rev - Cost) - (1 - p) x (PV(cost)
p =
PV(Cost)
PV(Rev) The Credit Decision
w Based on the probability of payoffs, the expected
profit can be expressed as:w The break even probability of collection is:
p x PV(Rev - Cost) - (1 - p) x (PV(cost)
p =
PV(Cost)
PV(Rev)