I have a fainal exam

Question 2 Hussein Al Lawati SAOG has recognized that the organization is facing a liquidity crisis. Accordingly, the accountant of the organization has studied the payment records from the customer and has noticed that the company at present offers its customers 25 days credit. Half the customers by value, pay on time. The other half takes an average of 50 days to pay. In this background you are planning to offer a cash discount of 2.5 per cent to your customers for the payment made within 25 days. The credit controller anticipates that half of the customers who now take an average of 50 days to pay will pay in 25 days. The other half will still take an average of 50 days to pay. It is anticipated that the proposed scheme will reduce bad debts amount by RO. 450,000 a year. Annual sales revenue of RO 45,000,000 is made evenly throughout the year. At present the business has a large overdraft RO. 5,000,000 with its bank at an interest of 7 percent a year. Required: a. Calculate receivables outstanding under both the old and new schemes. (8 Marks) b. How much will the scheme cost the business in discounts? (2 Marks) c. How much is the Net cost of the discount scheme? Should the business go ahead with the scheme? (4 Marks) d. Evaluate the Policy that should be implemented by the organization to improve its receivable management? (6 Marks) (Total 20 Marks)