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3) Geezer Ltd currently makes all sales on credit and offers no cash discount. The finance manager is considering offering a 2% cash discount for
3) Geezer Ltd currently makes all sales on credit and offers no cash discount. The finance manager is considering offering a 2% cash discount for payments made within 15 days. Geezers current Average Collection Period is 60 days, sales are 40,000 units, selling price is $45 per unit and variable costs $36 per unit. Geezer expects that changes to its credit terms will result in an increase in sales to 42,000 units, that 70% of customers will take the discount and that the Average Collection Period will drop to 30 days. If Geezer's WACC is 25%, should it make this change to its collections policy
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