E. Credit terms A company is contemplating changing its terms of sale to allow customers to purchase its products on account. a. current level of sales: $30,000,000 b. current EBIT as a percent of sales: 10% c. current fixed costs: $10,000,000 d. Determine the percentage variable costs that result for EBIT. d. inventory turnover: 5 e. expected additional sales: 20% f. expected portion of future sales that remain cash sales despite the change in credit policy: 5% g. expected average time to payment on credit sales: 60 days h. expected portion of credit sales that will be uncollectible: 1% i. expected change in fixed costs: $75,000 j expected change in variable costs: 1% k. expected change in inventory turnover: 0.5 1. cost to carry inventory: 10% m.expected cost to carry accounts receivable: 5% 1. How does the company expect its revenue and cost of revenue to change if it makes this change in the terms of sale? 2. How much will the cost to carry inventory change in $)? 3. What will the average account receivable balance be, and how much will it cost the company in dollars) to carry those accounts receivable be? 4. What will the total losses due to uncollectible accounts be? 5. How is the company's total operating cash flow expected to change with this change in the company's credit policy? 6. How is the company's operating cash flow margin (operating cash flow/total sales) change expected to change with this change in the company's credit policy? 7. Based on your analysis, should the company make this change in its terms of sale? Explain. E. Credit terms A company is contemplating changing its terms of sale to allow customers to purchase its products on account. a. current level of sales: $30,000,000 b. current EBIT as a percent of sales: 10% c. current fixed costs: $10,000,000 d. Determine the percentage variable costs that result for EBIT. d. inventory turnover: 5 e. expected additional sales: 20% f. expected portion of future sales that remain cash sales despite the change in credit policy: 5% g. expected average time to payment on credit sales: 60 days h. expected portion of credit sales that will be uncollectible: 1% i. expected change in fixed costs: $75,000 j expected change in variable costs: 1% k. expected change in inventory turnover: 0.5 1. cost to carry inventory: 10% m.expected cost to carry accounts receivable: 5% 1. How does the company expect its revenue and cost of revenue to change if it makes this change in the terms of sale? 2. How much will the cost to carry inventory change in $)? 3. What will the average account receivable balance be, and how much will it cost the company in dollars) to carry those accounts receivable be? 4. What will the total losses due to uncollectible accounts be? 5. How is the company's total operating cash flow expected to change with this change in the company's credit policy? 6. How is the company's operating cash flow margin (operating cash flow/total sales) change expected to change with this change in the company's credit policy? 7. Based on your analysis, should the company make this change in its terms of sale? Explain