Wholesalers Ltd. deals in sale of foodstuffs to retailers. Owing to economic depression, the firm intends to relax its credit policy to boost productivity and sales.The firms current credit policy is net 30 and the average debt collection period is 45 days.The current annual credit in amount to Sh.60 million. The firm intends to change to net 60 where sales are expected to increase by 25%. Credit and debt analysis costs will increase from the current 2% to 2.5% of credit sales. Bad debts will also increase from the current 1.5% to 2% of credit sales, variable costs account for 75% of sales and return on assets is 12%. Assume a 360 day year.

Required: Advise the company on whether to adopt the new credit policy