Problem 7-24 Credit policy decision with changing variables (L07-4) Dome Metals has credit sales of $252,000 yearly with credit terms of net 60 days, which is also the average collection period. a. Assume the firm offers a 3 percent discount for payment in 10 days and every customer takes advantage of the discount. Also assume the firm uses the cash generated from its reduced receivables to reduce its bank loans which cost 11 percent. What will the net gain or loss be to the firm if this discount is offered? (Use a 360-day year.) Net change in income Problem 7-25 Credit policy decision with changing variables (LO7-4) Dome Metals has credit sales of $360,000 yearly with credit terms of net 45 days, which is also the average collection period. Assume the firm adopts new credit terms of 5/10, net 45 and all customers pay on the last day of the discount period. Any reduction in accounts receivable will be used to reduce the firm's bank loan which costs 12 percent. The new credit terms will increase sales by 20% because the 5% discount will make the firm's price competitive. a. If Dome earns 25 percent on sales before discounts, what will be the net change in income if the new credit terms are adopted? (Use a 360-day year.) OK nces Net change in incomo Problem 7-23 Credit policy decision with changing variables (L07-4) Dome Metals has credit sales of $414,000 yearly. If Dome offers a 4 percent discount for payment in 10 days, what will the average accounts receivable balance be? Assume all customers would pay on the last day of the discount period. (Use a 360-day year.) Average receivables balance PS