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Question 6 Terang Ltd at present offers its customers 30 days\" credit. Half the customers, by value, pay on time. The other half take an average of T0 days to pay. The company is considering offering a discount of 2 per cent to its customers for payment within 30 days. It anticipates that half of the customers who now take an average of 70 days to pay will pay in 30 days. The other half will still take 70 days to pay. The scheme will also reduce bad debts by $18,000 per year. Annual sales of $3,650,000 are made evenly throughout the year. At present the company has a large bank overdraft on which interest is charged at 17 per cent per annum. Reguired (a) Would you recommend that the company proceed with the discount scheme? Justify your answer with appropriate calculations. (7 marks) (b) Explain the likely costs associated with a business maintaining an unnecessarily high cash balance