JJ Ltd. has presented you the following information.

The annual Credit sale at current level is $200, 000; annual operating fixed cost is $ 40,000 and current level of variable cost is $80,000. JJ Ltd. now contemplates to increase the average collection period from 30 days to 60 days. As a result of the increase in the collection period the firm's credit sale increases to $275,000 and the variable cost increases by the same percent of increase in sales. The firm has 20 percent rate of return on investments and a year is assumed to have 360 days.

Required

i) Calculate

1) Percentage increase in sale from the old to the new proposal

2) Variable cost of the new proposal

3) Receivable turnover of the two proposals(the old and the new)

4) Average investment in receivables under the two proposals

5) Average investment tied up/blocked/ because of increase in average collection period.

6) The marginal benefit on the new proposal

7) The opportunity of the tied up average receivable

ii) Should JJ Ltd. Accept the new proposal? Why?