1) The sales force is pressuring management to follow the lead of the competition and consider more relaxed credit terms since it feels it is losing sales. Management has agreed to conduct an analysis based on the assumptions on three proposed alternatives (assume no change in fixed costs): Current Terms (E) Proposed Terms Proposed Terms Proposed Terms Option 1 (N) Option 2 (N) Option 3 (N) Terms Net 30 Net 45 Net 60 2/10, Net 30 Sales Growth Rate (e) 10% 20% 15% Annual Credit Sales $ 1,000,000 $ 1,100,000 $ 1,200,000 $ 1,150,000 Daily Credit Sales (S) $ 2,739.73 $ 3,013.70 $ $287.67 3,150,68 2% Cash Discount offered (d) Customers taking discount % (p) SOK DSO - discount takers (DP) 12 42 S5 67 42 75% 75% 75% 75% DSO - non discount takers (CP) Variable Cost Ratio (VCR) Collection/Credit Exo (EXP) at CP Bad Debt Expense Ratio (b) at CP Annual Cost of Capital (0) 2% 2.50% 3.00% 1.75% 10% 12.50% 15% 7.50X 15% No Change No Change No Change A. Calculate the daily NPV (2) of the existing policy: Ze = SE(1-de)pe(1-be)/(1 + iDPE) + SE(1-pe)(1-be)/(1 + iCPE) - VCR (SE) EXPE (SE)/(1 + iCPE)