Kamal's Tools is considering offering a cash discount to speed up the collection of accounts receivable. Currently

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Kamal's Tools is considering offering a cash discount to speed up the collection of accounts receivable. Currently the firm has an average collection period of 65 days, annual sales are 35,000 units, the per unit price is US$40, and the per unit variable cost is US$29. A 2 percent cash discount is being considered. Kamal's Tools estimates that 80 percent of its customers will take the 2 percent discount. If sales are expected to rise to 37,000 units per year and the firm has a 15 percent required rate of return, what minimum average collection period is required to approve the cash discount plan?

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Principles of Managerial Finance

ISBN: 978-1408271582

Arab World Edition

Authors: Lawrence J. Gitman, Chad J. Zutter, Wajeeh Elali, Amer Al Roubaix

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