The Cold Fusion Corp. (manufacturer of the Mr. Fusion home power plant) is considering a new credit policy. The current policy is cash only. The new policy would involve extending credit for one period. Based on the following information, determine if a switch is advisable. The interest rate is 2.0 percent per period.
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Current Policy
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New Policy
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Price per unit
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$ 175
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$ 175
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Cost per unit
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$ 130
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$ 130
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Sales per period in units
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1,000
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1,100
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