The present sales of ABC enterprises are Rs 50 million. The firm classifies its customers into 3 credit categories: A, B and C. The firm extends unlimited credit to customers in category A, limited credit to customers in category B and no credit to customer in category C. As a result of this credit policy, the firm is foregoing sales to the extent of Rs5 million to customers in category B and Rs 10 million to customers in category C. The firm is considering the adoption of a more liberal credit policy under which customers in category B would be extended unlimited credit and customers in category C would be provided limited credit. Such relaxation would increase the sales by Rs10 million on which bad debt losses would be 8%. The contribution margin ratio for the firm is 15%, the average collection period is 60days, and the cost of capital is 15%. The tax rate of the firm is 40%.