A company currently gives 28 days’ credit for all sales but experiences the repayments schedule listed in the second column below. The final column shows the forecast collections if the company offered a 1% discount for payment within seven days. Is the proposed credit policy profitable from the company’s point of view if the company’s borrowing rate is 9% and the customers’ average annual borrowing rate is 12%?

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400 Month Without discount With trade discount Within 7 days 0 1 150 280 2345 100 70 50 50 4 10 10 5 10 10 Total sales 570 570