ABC Inc. is proposing a change in its credit policy to increase sales of Product XYZ Existing terms is 1/10, net 30 New terms is 2/20, net 40 $ New sales level (all credit sales) Original sales level (all credit sales) Contribution Margin ration 24,000,000 20,000,000 $ 30% 5% 2% % bad debt losses on new sales level % bad debt losses on original sales level New average collection period (days) Original average collection period (days) Cost of Capital 26 15 10% Cost of Goods sold as a percentage of sales 60% ABC also anticipates to have keep additional inventory. The inventory turnover rate would improve with new sales. Inventory turnover on new sales level 10 Inventory turnover on original sales level 5 10% Financing cost for Working Capital is Tax rate 40% Current Liabilities for XYZ zero dollars Before credit policy changes, 75% of the customers takes the early payment disco Anticipate only 70% of the customers would take the discount after the change. What is net annual benefit of changing to the new credit policy?