Rockwell Heating is selling a commercial heating unit at the price of £100,000 per unit.The variable
cost of producing this unit is £75,000.Rockwell is considering offering credit terms to their
customers, which would allow payment to be delayed one month.Rockwell predicts that offering
these terms will increase monthly sales from 50 units to 60 units.Rockwell does not expect the
increased production to change variable cost and Rockwell does not expect to charge a higher
price.The appropriate discount rate is 1% a month.Determine the probability of payment that would
make Rockwell indifferent between granting credit and the present policy.

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The Answer of Rockwell Heating is selling a commercial heating unit at the price of £100,000 per unit.The variable
cost of producing this unit is £75,000.Rockwell is considering offering credit terms to their
customers, which would allow payment to be delayed one month.Rockwell predicts that offering
these terms will increase monthly sales from 50 units to 60 units.Rockwell does not expect the
increased production to change variable cost and Rockwell does not expect to charge a higher
price.The appropriate discount rate is 1% a month.Determine the probability of payment that would
make Rockwell indifferent between granting credit and the present policy.

Rockwell Heating Is Selling a Commercial Heating Unit at the Price