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Batu and Stone Company currently sells on credit only and does not offer any discounts. In an attempt to increase sales, the board is considering
Batu and Stone Company currently sells on credit only and does not offer any discounts. In an attempt to increase sales, the board is considering offering a 5% discount for payment within 15 days. Currently, the average collection period is 60 days, sales are 30,000 units, selling price is RM 40 per unit, and variable cost per unit is RM32. If the discount is implemented, it is expected that sales will increase to 38,000 units, that 80% of sales will take the discount, and the average collection period will fall to 30 days. The firm's required rate of return is 20%. Should the proposed discount be offered? (Note: Use a 365-day year)
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