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Osama Tech has annual credit sales of $24,000,000, and three months are allowed for payment. The company decides to offer a 2% discount for payments
Osama Tech has annual credit sales of $24,000,000, and three months are allowed for payment. The company decides to offer a 2% discount for payments within 10-days from date of invoice, and to reduce the maximum time allowed for payment from three months to two months. It is estimated that 50% of its customers will take the discount offer. Assurning that the volume of sales would not be affected by the discount offer and change in credit period extended to customers, what would be the effect of the discount offer? Assume a 360-day year and the required rate of return is 20%. 2 points Estimate the profit forgone by offering the discount * O $2,400,000 $12,000,000 $240,000 O $480,000
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