Use the following information for questions 7 to 9: Synaitec Ltd. sells artificial

intelligence chips to car manufacturers for self-driving vehicles. The company has

seen substantial bad debts as upstarts struggle in the market and is considering

changing its credit terms substantially. Currently, the company employs a lenient

credit policy. A change to a more stringent policy is expected to lower bad debts,

however, the impact on sales and working capital requirements has not yet been

determined. Currently, the company has sales of R3 million which is expected to

fall to R2.5 million. The gross profit margin of 80% is expected to stay the same.

Bad debts are currently equal to 10% of sales, it is expected that under the new

policy, this would fall to 2% of sales. The days sales outstanding (or average

collection period) is currently 60 days, this is expected to drop to 30 days under

the new policy. The company ties an opportunity cost of 12% to its working

capital layout. Determine the effect on the net income such a change in policy

would bring about and choose the nearest answer. Required for question 7:

Calculate the change in the investment in accounts receivable and choose the

most correct option. (This question is worth 2 Marks)

A. -R221 917

B. -R26 630

C. R26 630

D. R221 917

With reference to the information given in question 7, calculate the change in bad

debts (ignore the direction) from the old to the new policy and choose the most

correct option.

A. R50 000

B. R100 000

C. R250 000

D. R300 000

Determine the change in gross profits resulting from the change in policy and

choose the most correct answer.

A. -R2.4m

B. -R2.0m

C. -R0.4m

D. R0.4m

Please do all parts