A. Kiriam Kaddi Enterprises currently give credit terms of 30 days. It has K100 million in total sales of which 20 percent are on cash basis, and its average collection period is 45 days. To stimulate demand, the company may give credit terms of 60 days. If it does enforce these terms, credit sales are expected to increase by 15 percent. After the change, the average collection period is expected to be 75 days, with no difference in payment habits between the old and the new customers. Variable costs are K0.80 for every K1.00 of sales, to support extra credit sales, creditors are expected to increase by K4 million and the company's before tax required rate of return on investment in receivables is 20 percent. Should the company extend its credit period? (Assume a 360 days year). (18 Marks) B. Finder Limited faces a fixed cost of K40,000 to obtain new funds. There is a requirement for K240,000 of cash over each period of one year for the foreseeable future. The interest cost of new funds is 12% per annum and the interest rate earned on short-term securities is 9% per annum. How much finance should Finder Limited raise at a time. ( 7 Marks) [Total: 25 Marks]