Castlefield Furniture Ltd. wants to change its credit policy to stimulate the sales of its new line of leather sofas. The credit manager has asked you to analyze the situation. You have gathered the following data from your company's records and forecasts:

Required:
Determine which length of credit period option will result in the greatest increase in profits. Show all calculations.

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Annual sofa sales Average selling price per sofa Average variable costs Weighted average cost of capital (WACC) Average collection period (current $1.300,000.00 $1,500.00 $900.00 12% 25 days Credit Options Increase in collection period (days) 5 Increase in sales revenue per year $150,000 10 $175,000 15 $200,000