Rockwell heating is selling commercial heating unit

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Reference no: EM132046851

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.

Should Rockwell grant credit terms? Why? Please show your work.

Reference no: EM132046851

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