Edgeworth 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. Edgeworth is considering offering credit terms to their customers, which would allow payment to be delayed one month. Edgeworth predicts that offering these terms will increase monthly sales from 50 units to 60 units. Edgeworth does not expect the increased production to change variable cost and Edgeworth does not expect to charge a higher price. The appropriate discount rate is 1% a month. Determine the probability of payment that would make Edgeworth indifferent between granting credit and the present policy.
B. b = .968

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The Answer of Edgeworth 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. Edgeworth is considering offering credit terms to their customers, which would allow payment to be delayed one month. Edgeworth predicts that offering these terms will increase monthly sales from 50 units to 60 units. Edgeworth does not expect the increased production to change variable cost and Edgeworth does not expect to charge a higher price. The appropriate discount rate is 1% a month. Determine the probability of payment that would make Edgeworth indifferent between granting credit and the present policy.
B. b = .968

Edgeworth Heating Is Selling a Commercial Heating Unit at the Price