B5. (Changing credit policies) Conn Music Company is considering a new credit policy that has much more stringent credit standards. Sharon Conn estimates that the new policy will affect several key variables as shown here. Assume that the cost of goods sold is a cash out- lay at time zero and that the expected sales (net of bad debt) are collected at the end of the collection period. Which policy is better? CURRENT POLICY PROPOSED POLICY Annual sales Cost of goods sold/Sales Bad debt/Sales Collection period Required return $15 million 72% 4% 2 months (0.1667 years) 15% $14 million 72% 2% 1 month (0.08333 years) 15% Assume zero recovery in case of bad debt. The 10% interest rate is per year. The current policy is better. The proposed policy is better. Neither policy is better, the firm should be indifferent between them. There is not enough information to tell