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 64 days, annual sales are 31,000units, the per-unit price is $36, and the per-unit variable cost is $26. A 11% cash discount is being considered. Klein's Tools estimates that 85% of its customers will take the 11% discount. If sales are expected to rise to 33,000 units per year and the firm has a 17% required rate of return, what minimum average collection period is required to approve the cash discount plan?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started