Aurora Corporation has annual credit sales of $1,250,000 with credit terms of 45 days and an average collection period of 45 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 60% of customers will take advantage of the discount and the average collection period will be 30 days. With the change in cash, they are looking at an investment that provides an impressive 6% return.

Should the company adopt the policy? Answer

Support your answer by calculating the net change. Fill in the blanks below and please round to the dollar. No comma is needed between thousands and hundreds. If a negative, please use a - negative sign NOT brackets.

Change in AR

NEW AR Answer

OLD AR Answer

Increase in Cash Answer

ASSUMING the decrease in AR was $50,000, calculate the following:

INCREASE/ DECREASE IN INTEREST REVENUE DUE TO CHANGE IN AR Answer

INSERT MISSING ITEM Answer Answer

NET CHANGE Answer