Gardner Company currently makes all sales on credit and offers no cash discount. The firm is considering offering a

4%

cash discount for payment within 15 days. The firm's current average collection period is

60

days, sales are

40,000

units, selling price is

$48

per unit, and variable cost per unit is

$36.

The firm expects that the change in credit terms will result in an increase in sales to

44,000

units, that

70%

of the sales will take the discount, and that the average collection period will fall to

30

days. If the firm's required rate of return on equal-risk investments is

10%,

should the proposed discount be offered?

(Note:

Assume a 365-day year.)