A credit policy specifies how customers qualify for credit, the maximum amount of credit that oustomers are allowed, the terms of credit sales, and what actions will be taken i customers do not pay on time. To ensure that the credit policy is being followed and thatis achieving the desired objective, it should be monitored. If customers' payment patterns dange significantly, the firm should consider changing its credit policy Which statement best describes whether a proposed change in credit policy should be implemented? O A policy that reduces the average collection period should be implemented O A policy that provides the cash flows with the highest net present value should be implemented. O A policy that provides the lowest average collection period (ACP) should be implemented. O A policy that provides the lowest bad debts with the least amount of effort should be implemented Consider the case of Jamison Company: A new financial manager at the Jamison Company has proposed a change to the company's credit policy to lower the average collection period (ACP) of the customers who forgo the discount by ten days. The cost of the increased credit effort is $10 million, and the manager estimates that the company will lose 4% in gross sales as a result. The discount customers will not be affected. The proposed data, including the daily data, is reflected in the following table Existing Policy Proposed Policy I. General Credit Policy Information Credit terms Average collection period (ACP) for all customers ACP for customers who take the discount (15%) ACP for customers who forgo the discount (85%) II. Annual Credit Sales and Costs Credit sales Amount paid by discount customers (net discount) Amount paid by nondiscount customers Net credit sales variable operating costs (82% of net sales) Bad debts Credit evaluation and collection costs III. Daily Credit Sales and Costs Net credit sales Amount paid by discount customers (net discount) Amount paid by nondiscount customers variable operating costs (82% of net sales) Bad debts Credit evaluation and collection casts 2/10 net 30 44.0 days 10.0 days 50.0 days 2/10 net 30 35.5 days 10.0 days 40.0 days $160,000 $23,520 $136,000.00 159,520 $130,806.40 $0.0 $16,000 $153,600 $23,520 $129,600 153,120 $125,558 $0.0 $16,010 $437 $64 $373 358 $0.0 $44 $420 $64 $355 $344 $0.0 $44 Your job is to review the proposal and make a recommendation, To simplity your analysis, assume: (1) that sales occur evenly throughout the year; (2) that the variable operating costs and the credit evaluation and collection costs are incurred at the time of sale; and (3) that a 365-day yer is used to compute the daily figures. amison's cost of capital is 7.5% Complete the following sentences: flow, which has at a net present value (NPV) of daily cash flow, with a net present value of ,compared to the proposed policy, which provides Since this change is expected to have a permanent and continuing effect on Jamison, then this daily difference of will the value of the frm by A credit policy specifies how customers qualify for credit, the maximum amount of credit that oustomers are allowed, the terms of credit sales, and what actions will be taken i customers do not pay on time. To ensure that the credit policy is being followed and thatis achieving the desired objective, it should be monitored. If customers' payment patterns dange significantly, the firm should consider changing its credit policy Which statement best describes whether a proposed change in credit policy should be implemented? O A policy that reduces the average collection period should be implemented O A policy that provides the cash flows with the highest net present value should be implemented. O A policy that provides the lowest average collection period (ACP) should be implemented. O A policy that provides the lowest bad debts with the least amount of effort should be implemented Consider the case of Jamison Company: A new financial manager at the Jamison Company has proposed a change to the company's credit policy to lower the average collection period (ACP) of the customers who forgo the discount by ten days. The cost of the increased credit effort is $10 million, and the manager estimates that the company will lose 4% in gross sales as a result. The discount customers will not be affected. The proposed data, including the daily data, is reflected in the following table Existing Policy Proposed Policy I. General Credit Policy Information Credit terms Average collection period (ACP) for all customers ACP for customers who take the discount (15%) ACP for customers who forgo the discount (85%) II. Annual Credit Sales and Costs Credit sales Amount paid by discount customers (net discount) Amount paid by nondiscount customers Net credit sales variable operating costs (82% of net sales) Bad debts Credit evaluation and collection costs III. Daily Credit Sales and Costs Net credit sales Amount paid by discount customers (net discount) Amount paid by nondiscount customers variable operating costs (82% of net sales) Bad debts Credit evaluation and collection casts 2/10 net 30 44.0 days 10.0 days 50.0 days 2/10 net 30 35.5 days 10.0 days 40.0 days $160,000 $23,520 $136,000.00 159,520 $130,806.40 $0.0 $16,000 $153,600 $23,520 $129,600 153,120 $125,558 $0.0 $16,010 $437 $64 $373 358 $0.0 $44 $420 $64 $355 $344 $0.0 $44 Your job is to review the proposal and make a recommendation, To simplity your analysis, assume: (1) that sales occur evenly throughout the year; (2) that the variable operating costs and the credit evaluation and collection costs are incurred at the time of sale; and (3) that a 365-day yer is used to compute the daily figures. amison's cost of capital is 7.5% Complete the following sentences: flow, which has at a net present value (NPV) of daily cash flow, with a net present value of ,compared to the proposed policy, which provides Since this change is expected to have a permanent and continuing effect on Jamison, then this daily difference of will the value of the frm by