Question $14(4$ points$)$

Tobin Fisheries currently sells to its customers on terms of $\frac{3}{10},$ net $30.$ Its average collection period

is $20$ days, with $80$ percent currently taking up the discount. All sales are credit sales. Upper

management has expressed concern about sluggish sales, and the marketing department would like a

more attractive credit package. Next year's sales are projected to be $$2\mathrm{.}19$ million. It has been

estimated that with terms of $\frac{4}{15},$ net $45,$ sales next year would jump to $$2\mathrm{.}92$ million and $65$ percent

of sales would take the discount, but the average collection period would increase to $42$ days. Tobin's

contribution margin of $6$ percent would hold with the expansion of sales, as would its short$-$term

financing cost of $10$ percent.

Q$14$: Incremental opportunity cost on investment is:

$($$$1,160)$

$$21,600$

$($$$21,600)$

$$216,000$

$$1,160$