Use the following information for questions 19-21.

Your firm's CFO has tasked you with evaluating the net present value associated with changing the firm's trade credit terms from net 30 days to net 45 days.Other pertinent assumptions include:

Annual sales with existing credit terms = $5,000,000

Variable cost ratio with existing credit terms = 30% of revenues

Costs of collections with existing credit terms = 1% of revenues

Bad debt expense ratio with existing credit terms = 2% of revenues

Annual sales with new credit terms = $5,500,000

Variable cost ratio with new credit terms = 30% of revenues

Costs of collections with new credit terms = 1% of revenues

Bad debt expense ratio with new credit terms = 3% of revenues

Discount rate = 10%

1.What is the aggregate increase in net present value from making this change to trade credit policy?

2.What is the optimal cash discount percentage with the following financial situation: Cash discount period=10 days, credit period=30 days, and annual cost of capital=22%.