Initiating a cash discountGardner Company currently makes all sales on credit and offers no cash discount. The firm is considering offering a 1% 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 $31. 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.)

the additional profit contribution from additional sales is

The amount of cost that will be saved due to the reduction in average A/R is

The cost of extending the cash discount to customer is

The net profit from the proposed cash discount is

Should the proposed cash discount be offered?