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Please find the below attached question and give the answer properly. 8. Sagar company currently makes all sales on credit and offers no cash discount.
Please find the below attached question and give the answer properly.
8. Sagar company currently makes all sales on credit and offers no cash discount. It considering a 2% cash discount for payment within 10 days. The firm's current average collection period is 60 days, sales are 200000 units, selling price is Rs. 30 per unit, variables cost per unit is Rs. 20 and average cost per unit is Rs. 25 at the current sales volume. It is expected that the change in credit terms will result in increase in sales to 225000 units and the average collection period will fall to 45 days. However, due to increased sales, increased working capital requirement will be Rs. 100000 (does not to account the effect on debtors). Assuming that 50 per cent total sales will be on cash discount and 20 per cent is the required return on investment, should the proposed discount be offered
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