Firm A expects to have sales of $15 million under its current credit policy. The present terms are net 30; the days sales outstanding (DSO) is 60 days; and the bad debt loss percentage is 5 percent. The treasurer has proposed that the credit period be shortened to 15 days. This change would reduce expected sales by $500,000 but it would shorten the DSO on the remaining sales to 30 days. Expected bad debt losses on the remaining sales would fall to 3 percent. The variable cost percentage is 60 percent and the cost of capital is 15 percent. (Please show steps to solve)

1. What are the incremental pre-tax profits from this proposal? (a. 181,250, b. 271,750, c. 256,250, d. 206,500, e. 231,250)