(10 pts) 4. Sanchez Corporation wishes to speed up collection of its receivables. Sanchez currently offers credit terms of net 40. It is considering changing to terms of 2/10 net 30. The collection period is expected to be reduced from 60 to 35 days. The percentage of customers paying within the discount period is expected to be 40 percent. Bad debt losses average 6 percent of sales and are expected to increase to 8 percent under the proposed policy. The inventory level is expected to increase by $300,000. Annual billings are $50 million. The variable cost ratio is 70 percent. The pretax return on funds made available by this change in policy is 8 percent. Assuming the change in terms is made; determine the net effect on Sanchez's pretax profits.