Question
Klein's Tools is considering offering a cash discount to speed up the collection of accounts receivable. Currently the firm has an average collection period of
Klein's Tools is considering offering a cash discount to speed up the collection of accounts receivable. Currently the firm has an average collection period of 67days, annual sales are 40,000 units, theper-unit price is $41,and theper-unit variable cost is $30. A 2%cash discount is being considered. Klein's Tools estimates that 78%of its customers will take the 2%discount. If sales are expected to rise to 42,000units per year and the firm has a 14%required rate ofreturn, what minimum average collection period is required to approve the cash discountplan?
The minimum average collection period required to approve the cash discount plan is _________days?
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