Managerial accounting

The PKJ Company currently sells on terms 'net 45'. The company has sales of

The PKJ Company currently sells on terms net 45'. The company has sales of 07.50 Lakhs a year, with 80% being the credit sales. At present. the average collection period is 60 days. The company is now considering offering terms '2/10. net 45'. It is expected that the new credit terms will increase current credit sales by I /3rd. The company also expects that 60% of the credit sales will be on discount and average collection period will be reduced to 30 days. The average selling price of the company is e 100 per unit and variable cost is 85% of selling price. The Company is subject to a tax rate of 40%, and its before-tax rate of borrowing for working capital is 18%. Should the company change its credit terms to '2/10. net 45'? Support your answers by calculating the expected change in net profit. (Assume 360 days in a year)