Edgeworth Heating Is Selling a Commercial Heating Unit at the Price

question 20

Essay

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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Definitions:

Significance Level

A threshold or probability below which an observed result is considered statistically significant, often denoted by alpha (α).

Coefficient of Determination

A statistical measure, often denoted as R^2, that indicates the proportion of the variance in the dependent variable that is predictable from the independent variables.

Service Time

The duration for which a service is provided or the length of time an employee has worked at a particular organization.

Electronic Equipment

Devices or systems that use electric currents or electromagnetic fields to function.