QUESTION 2 (15 Mark) Monroe Co. has sales of $400,000 with credit terms of 1/10, net 30 . It spends $5,000 per year on A/R collections and bad debts represent 2.5% of sales. Currently 50% of customers pay on Day 10 (and take the 1% discount), 40% pay on Day 30 , and 10% pay on Day 40 . Monroe is thinking of changing terms to 2/10, net 40 . With this new policy, 60% of customers will pay in 10 days and take the new 2% discount, 20% will pay on Day 40 , and 20% on Day 50 . Monroe also expects this change to increase sales by $130,000. The company will also reduce spending on A/R collections to $2,000 but expects the bad debt percentage to increase to 6% of sales. The company's cost of capital is 20%. Required : Should Monroe adopt the new credit policy