Regency Rug Repair Company, which currently offers cash sales only, is trying to decide whether to give customers 30 days to pay. The firm repairs 6,000 rugs per month at an average price of $32 each with a variable cost of $28.

If it offers credit sales, Regency expects bad-debt expenses at 1% of sales and an average collection period of 30 days. Regency expects that if it does offer credit, sales will increase by 300 repairs per month. If the firm’s cost of capital is 0.5% per month, what recommendation would you give the firm? Use your analysis to justify your answer.