The Theodore Bruin Corporation, a manufacturer of high-quality stuffed animals, does not extend credit to its customers.
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The Theodore Bruin Corporation, a manufacturer of high-quality stuffed animals, does not extend credit to its customers. A study has shown that, by offering credit, the company can increase sales from the current 750 units to 1,000 units. The cost per unit, however, will increase from \($43\) to \($45,\) reflecting the expense of managing accounts receivable. The current price of a toy is \($48.\) The probability of a customer making a payment on a credit sale is 92 percent, and the appropriate discount rate is 2.7 percent.
By how much should Theodore Bruin increase the price to make offering credit an attractive strategy?
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