Initiating a cash discount: Gardner Company currently makes all sales on credit and offers no cash discount. The firm is considering offering a 2 % 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 $45 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 42,000 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 25 % should the proposed discount be offered? ( Note: Assume a 365-day year.)

The additional profit contribution from an increase in sales is $___________. (Round to the nearest dollar.)

The amount of cost that will be saved due to the reduction in average A/R is $_______ (Round to the nearest dollar.)

The cost of extending the cash discount to customer is $________ (Round to the nearest dollar.)

The net profit from the proposed cash discount is $______ (Round to the nearest dollar.)

Should the proposed cash discount be offered? Yes or No