$1.$ UBS Ltd is considering changing its credit policy. Current sales under the present policy are Tshs $2,400$ million per annum. The company has made the following estimates:

Present Policy Policy A Policy B

Additional sales demand $25\%35\%$

Average collection period $1$ Month $2$ Months $3$ Months

Bad debt risk $(\%$ of sales$)1\%3\%6\%$

You are given the following additional information:

$$ The company$$s expected return on investment is $20\%$

$$ Variable costs are $70\%$ of gross sales value

$$ There will be no increase in fixed costs from extra turnover

$$ There will be no increase in average stocks or creditors

Required: Advise the company which is the preferable policy.