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Need the steps and calculation To encourage customers to pay on time, KXP Co proposes introducing an early settlement discount of 1 for payment within
Need the steps and calculation
To encourage customers to pay on time, KXP Co proposes introducing an early settlement discount of \1 for payment within 30 days, while increasing its normal credit period to 45 days. It is expected that, on average, \60 of customers will take the discount and pay within 30 days, \30 of customers will pay within 45 day and \10 of customers will not change their current behavior. The company has an overdraft facility charging interest of \7 per year. KXP Co uses a working year consisting of 365 days. The industry case conversion cycle and receivable collection period are 50 days and 45 days respectively. a. Calculate the cash conversion cycle of KXP Co and comment briefly on the result. b. Calculate the net benefit or cost of the proposed changes in the trade receivables policy and comment on your findingsStep by Step Solution
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