5. Cash cycle (S31.1) A firm is considering several policy changes to increase sales. It plans to increase the variety of goods it keeps in inventory, but this will increase inventory by

$100,000. It will offer more liberal sales terms, but this will result in receivables increasing by $650,000. These actions are forecasted to increase sales by $8 million a year. Cost of goods sold will remain at 80% of sales. Because of the firm’s increased purchases for its own production needs, payables will increase by $350,000. What effect will these changes have on the firm’s cash cycle?