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32. Suppose that DigiView, a maker of digital video disk players, is considering increasing its credit terms from net 30 to net 60 . DigiView
32. Suppose that DigiView, a maker of digital video disk players, is considering increasing its credit terms from net 30 to net 60 . DigiView believes the relaxing terms would increase sales. Currently, DigiView's daily sales equal $100,000 and COGS represent 65% of sales. The firm's credit analysts estimate the aforementioned change in credit terms will lead to a 3% increase in sales. DigiView's DIH and DPO will be invariant to the change in policy and equal 40 and 30 days, respectively. Furthermore, assume the firm's annual opportunity cost is 10%. Decide whether DigiView should go ahead with the new credit policy. (7 Marks)
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