Aurora Corporation has annual credit sales of $1,200,000 with credit terms of 45 days and an average collection period of 40 days with no discount. In the current economy Aurora has fallen upon tough times and is looking for ways improve cash flow, so the company is considering a changing their collection policy to 1/10 net 30. They estimate 50% of customers will take advantage of the discount and the average collection period will be 28 days. With the change in cash, they are looking at an investment that provides an impressive 5% return.

a. Should the company adopt the policy? Support your answer by calculating the net change. (9 marks)

b. Besides offering a discount, how can Aurora improve their AR management process?(1 marks)