Question 22

Not yet answered

Marked out of 3.125

Flag question

Question text

Currently, ABC Ltd sell only on credit and do not offer cash discounts. Management is considering offering a 3% discount for payment within 20 days. Currently, the average collection period is 50 days, sales are 20,000 units, selling price is $80 per unit, and variable cost per unit is $30. If the discount is implemented, it is expected that sales will increase to 22,000 units, that 60% of sales will take the discount, and the average collection period will fall to 30 days. The firm's required rate of return is 10%. What is the net benefit/loss from implementing the proposed plan? Note, use a 365-day year.

Select one:

a. $96,265

b. $65,525

c. $49,995

d. $68,320

e. $71,115