Okaku Limited is considering increasing its credit period from $30$ days to $60$ days. The

company currently generates sales revenue to the amount of $N$$$4500000$ and the

variable costs for the sales amount to $N$$$3450000.$ The change in policy is expected to

result in an increase of sales revenue from $N$$$4500000$ to $N$$$5100000.$

Bad debt is expected to increase from its current level of $1\%$ of sales to $1\mathrm{.}5\%$ of sales. The

company's required rate of return is $20\%.$

Required:

a$)$ Calculate the effect of this proposal on the profits of Okaku Limited. Show all your

workings $(18$ marks$)$

b$)$ State whether or not you recommend that the change to be made. $(2$ marks$)$