Required: 1.1 Calculate the effect on profit based on increase in sales only (4 Marks) 1.2 Calculate the cost of marginal investment in accounts receivable. (11 Marks) 1.3 Calculate the effect on bad debt. (4 Marks) 1.4 Calculate the cost of settlement discount. (3 Marks) 1.5 Ted had a net increase in profit under the proposed credit terms, make a recommendation if he should implement the new credit terms or not the option you are recommending. (2 Marks) Ted owns a takeaway shop on the corner of Long Street, Cape Town. Ted has made special arrangements with some of his customers to purchase pies throughout the month where he collects the money after 30 days. Ted reckons that if he informs his customers that he will give them a collection period of 40 days instead of the current 30 , his credit sales will increase from 8125 pies in the previous financial year to 15000 pies. Ted knows that if he implements a more lenient policy, it will decrease his bad debts from 1% of credit sales to 0.05% of credit sales. Ted does not currently give discounts, but he estimates that 35% of his total customers will make use of this if he implements a discount policy of 5% discount if his customers pay within 10 days. The selling price of a pie is R12.50 and the variable cost per pie is R5. Use 360 days per year and 30 days per month. Ted has a required return on investment of 11% Required: 1.1 Calculate the effect on profit based on increase in sales only (4 Marks) 1.2 Calculate the cost of marginal investment in accounts receivable. (11 Marks) 1.3 Calculate the effect on bad debt. (4 Marks) 1.4 Calculate the cost of settlement discount. (3 Marks) 1.5 Ted had a net increase in profit under the proposed credit terms, make a recommendation if he should implement the new credit terms or not the option you are recommending. (2 Marks) Ted owns a takeaway shop on the corner of Long Street, Cape Town. Ted has made special arrangements with some of his customers to purchase pies throughout the month where he collects the money after 30 days. Ted reckons that if he informs his customers that he will give them a collection period of 40 days instead of the current 30 , his credit sales will increase from 8125 pies in the previous financial year to 15000 pies. Ted knows that if he implements a more lenient policy, it will decrease his bad debts from 1% of credit sales to 0.05% of credit sales. Ted does not currently give discounts, but he estimates that 35% of his total customers will make use of this if he implements a discount policy of 5% discount if his customers pay within 10 days. The selling price of a pie is R12.50 and the variable cost per pie is R5. Use 360 days per year and 30 days per month. Ted has a required return on investment of 11%