Friendly Robots Corporation had credit sales last year of $2,000,000 with terms of 60 days. As the company does not offer a discount for early payment the average collection period is 58 days. Management is looking to improve cash flow by changing the credit policy to 2/10, n/30. They estimate that 80% of customers will take advantage of the discount, reducing the average collection period to 13 days. The new discount is expected to increase sales by 5% (the profit margin will stay at the current 10%). The company will use any cash freed up to invest in bonds generating a return of 7%. Should the company adopt the policy? Support your answer by calculating the net change.
				Sales, old	2,000,000
				Collection period, old - days	58
				Discount offered	2%
% of customers taking discount	80%
Collection period, new - days	13
Increase in sales, %	5%
Profit margin	10%
Opportunity cost on cash (bond investment)	7%
Workings
Net change
Answer: should they do it?