3. What is the cost of the marginal cash discount

The next three questions apply to the information provided below. Dicksey Abattoirs Ltd. currently makes all sales (cattle skins) on credit and offers no cash discount. The firm is considering a 3% cash discount for payment within 10 days The firm's current average collection period (ACP) is 90 days, sales are 400 skins per year, selling price is R25 000 per skin, variable cost is R18 750 per skin, and the average cost per skin is R21 000. The firm expects that the change in credit terms will result in a minor increase in sales of 10 skins per year and that 75% of the sales will take the discount, and the average collection period will drop to firm's bad debt expense is expected to become negligible under the proposed plan. The bad debt expense is currently 0.5% of sales. The firm's required return on equal- risk investments is 20%. Assume 365 days in the year 30 days. The Question 10 What is the cost of marginal investment in accounts receivable under the proposed plan? 1. R246 875 2. R276 500 3. R313 460 4. R368 314 Question 11 What are the savings on marginal b ad debts under the proposed plan? 1. R 5 000 2. R 10 000 3. R 50 000 4. R500 000