Please answer number 5 at the bottom.

The Foglers are concerned about the firm's current credit policy. The terms of sale are net 30 , but they expect only 55% of the customers (by dollar value) to pay the full amount on day 30 , while the other 45% pay, on average, on Day 50 . Gross sales are currently $350,000 per year. Of the gross sales, 2% end up as bad debt losses. Monthly sales for the first six months of 2023 are provided in the table below. FRS is considering a change in credit policy. The change would entail 1) changing the credit terms to 2/10, net 30,2 ) employing stricter credit standards before granting credit, and 3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to the pay the full amount within 30 days. The owners believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm - after all, the discount amounts to a price reduction. The net expected result is for sales to increase to $375,000, for 35% of the paying customers to take the discount and pay on the 10th day, for 45% to pay the full amount on day 30 , for 15% to pay late on day 35 , and for bad debt losses to fall from 2% to 1.5% of gross sales. The firm's operating (variable) cost ratio will remain unchanged at 65%, and its cost for financing (notes payable or required return on investments) will remain unchanged at 5%. The company would have to purchase some new inventory to cover the additional sales. Inventory turnover averages 4 times per year, and CGS is 55% of sales. The most recent income statement with relevant information is given below. \begin{tabular}{|l|r|} \hline \multicolumn{2}{|c|}{ Table 2 - 2023 Income Statement } \\ \hline Gross Sales & $350,000 \\ \hline Less: discounts & 0 \\ \hline Net Sales & $350,000 \\ \hline Variable Costs (65\%) & 227,500 \\ \hline Profit before credit costs and taxes & $122,500 \\ (CM) & \\ \hline Credit related costs: & \\ \hline A/R Carrying costs & \\ \hline Inventory Investment cost & \\ \hline Bad Debt Losses & \\ \hline Profit before taxes & \\ \hline Taxes (26\%) & \\ \hline Net Income & \\ \hline \end{tabular} Suppose the firm makes the change, but its competitors react by making similar changes to their own credit terms, with the net result being that gross sales remain at the current $350,000 level. If this were to happen, no additional inventory purchases would be necessary. What would be the impact on the firm's after tax profitability? Based on the findings, should the company make the change? The Foglers are concerned about the firm's current credit policy. The terms of sale are net 30 , but they expect only 55% of the customers (by dollar value) to pay the full amount on day 30 , while the other 45% pay, on average, on Day 50 . Gross sales are currently $350,000 per year. Of the gross sales, 2% end up as bad debt losses. Monthly sales for the first six months of 2023 are provided in the table below. FRS is considering a change in credit policy. The change would entail 1) changing the credit terms to 2/10, net 30,2 ) employing stricter credit standards before granting credit, and 3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to the pay the full amount within 30 days. The owners believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm - after all, the discount amounts to a price reduction. The net expected result is for sales to increase to $375,000, for 35% of the paying customers to take the discount and pay on the 10th day, for 45% to pay the full amount on day 30 , for 15% to pay late on day 35 , and for bad debt losses to fall from 2% to 1.5% of gross sales. The firm's operating (variable) cost ratio will remain unchanged at 65%, and its cost for financing (notes payable or required return on investments) will remain unchanged at 5%. The company would have to purchase some new inventory to cover the additional sales. Inventory turnover averages 4 times per year, and CGS is 55% of sales. The most recent income statement with relevant information is given below. \begin{tabular}{|l|r|} \hline \multicolumn{2}{|c|}{ Table 2 - 2023 Income Statement } \\ \hline Gross Sales & $350,000 \\ \hline Less: discounts & 0 \\ \hline Net Sales & $350,000 \\ \hline Variable Costs (65\%) & 227,500 \\ \hline Profit before credit costs and taxes & $122,500 \\ (CM) & \\ \hline Credit related costs: & \\ \hline A/R Carrying costs & \\ \hline Inventory Investment cost & \\ \hline Bad Debt Losses & \\ \hline Profit before taxes & \\ \hline Taxes (26\%) & \\ \hline Net Income & \\ \hline \end{tabular} Suppose the firm makes the change, but its competitors react by making similar changes to their own credit terms, with the net result being that gross sales remain at the current $350,000 level. If this were to happen, no additional inventory purchases would be necessary. What would be the impact on the firm's after tax profitability? Based on the findings, should the company make the change