Easy Limited specializes in the manufacture of a computer component. The component is currently sold for Rs 1,000 and its variable cost is Rs 800. For the current year ended December 31, the company sold on an average 400 components per month. At present, the company grants one month’s credit to its customers. It is thinking of extending the same to two months on account of which the following are expected:   Increase in sales, 25 per cent Increase in stock, Rs 2,00,000   Increase in creditors, Rs 1,00,000 You are required to advise the company on whether or not to extend credit terms if 

(a) all customers avail of the extended credit period of two months and 

(b) existing customers do not avail of the credit terms but only the new customers avail of the same. Assume the entire increase in sales is attributable to the new customers. The company expects a minimum return of 40 per cent on the investments.