Question regarding oldew credit policy.

This is the proposed explanation/solution but I am unable to understand the method used.

I would appreciate a clarification on how to do this question to achieve the same results.

Thank you in advance

ifodectionat 2000000((1,920,0020 variable cost Retro. O credit rileded lest Taxes. 1794849113281881831627 78x -4) Tightening Credit Terms Jean Nowak, the new credit manager of Farpoint Communications, was alarmed to find that Farpoint sells on credit terms of net 70 days while industry-wide crodit terms have recently been lowered to net 30 days, On annual crodit sales of $10 million, Fappint currently averages 78 days of sales in accounts receivable. Nowak estimates that rightening the crodit terms to 30 days woald reduce annual sales to $9.6 million, but accounts receivable would drop to 35 days of sales and the savings on investment in them should more than overcome any loss in profit. Faryeint's variable cost ratio is 80%, and taxes are 269. If the intered rate on fundt inverted in receivables is 12%, should the change in credit terms be made