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Acompany is thinking about changing its credit policy to speed up its cash collections. The present policy calls for a 2/10, net 30 cash discount.

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Acompany is thinking about changing its credit policy to speed up its cash collections. The present policy calls for a 2/10, net 30 cash discount. The new policy would call for a 4/10, net 50 cash discount. Currently, 34% of its customers are taking the discount, and its anticipated that this number would go up to 55% with the new discount policy. It is further anticipated that annual sales would increase from a level of $414k to 5671k as a result of the change in the cash discount policy. The average inventory carried by the firm is based on an economicorder quantity (EOC). Assume that unit sales increase from 15k to 23.3k. The ordering cost per order is $190 and the carrying cost per unit is $1.69 (these values will not change with the fulfillment of the new discount policy). Each unit in inventory has an average cost of $11. The cost of goods sold equates to 60% of net sales, general and administrative expenses represent 17% of net sales, and interest payments of 14% will only be necessary for the increase in the accounts recevable and inventory balances. The firm is in a 37% tax bracket Required: Calculate the percentage change in earnings after taxes (EAT) between the current discount policy and the new discount policy Use a 360-day year. Note: The term "K" is used to represent thousands (x $1,000). Further Information: By the end of this problem, you are required to establish the percentage difference in EAT between the old policylie before the proposed discount) and the new policy t.e. after the proposed discount). In other words

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