3.) If the rm's variable cost of the $40,000,000 in sales is 80% determine the reduction in the average investment in accounts receivables and the annual savings that will result this reduces investment, assuming the sales remain constant. Reduction in investment in accounts receivables and annual savings Average Investments in Accounts Receivables with Cash Discount = ($40,000,000 "' 80%] / (365 / 45) (New Collection Period is 45 days) = $3,945,205.48 Average Investments in Accounts Receivables without Cash Discount = ($40,000,000 * 80%) / (365 / 75) = $6,575,342.47 Reduction in Investment in Accounts Receivables = $6,575,342.47 - $3,945,204.48