Initiating a cash discount; a company is considering offering a3% discount for payment wit
Initiating a cash discount; a company is considering offering a3% discount for payment within 15 days, the current averagecollection period is 60 days. Sales are 40,000 units and theselling price is $47 per unit. Variable cost per unit is $36.Thefirm expects that the change in credit terms will result in anincrease in sales to 43,000 units. That 70% of the sales will takethe discount and average collection period will fall to 30 days. Ifthe firms required rate of return on equal-risk investments is 25%should the proposed discount be offered?