Question 3 In the year 2015, weaker demand from a slower-growing Chinese economy was putting the global freight industry through rough water. Apart from China, the freight market is also plagued by a chronic overcapacity of ships ordered during the heydays of the industry. Assume today is January 2015. Mega Machines plc manufactures winches on freight vessels. Currently it has credit sales at 456,000 and the average debtor collection period is 47 days. It is considering the introduction of a new policy on debtor management to shorten the collection period to 30 days. Customers are expected to react adversely, resulting in a reduction in sales by 20,000. Incremental enforcement cost of the new policy are expected to be 1,000. Mega's bank charges an overdraft rate of 15 percent. Mega's sales contribution to profit is 10 percent. You are the finance manager of Mega. The Board of Directors has tasked you to appraise the above proposal. Required: a. Calculate the net benefit for the company if it introduces the new policy. Provide your recommendation. What would be the necessary cautions? (30 marks) b. Conduct sensitivity analysis on sales and comment on the result. How should the company safeguard its position on sales? (20 marks)