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A company is thinking about changing its credit policy to speed up its cash collections. The present policy calls for a 2/10, net 30 cash discount. The new policy would call for a 5/10 net 50 cash discount Currently, 36% of its customers are taking the discount, and it is anticipated that this number would go up to 51% with the new discount policy. It is further anticipated that annual sales would increase from a level of $456k to $700k asaresult of the change in the cash discount policy. The average Inventory carried by the firm is based on an economic order quantity (EOQI. Assume that unit sales increase from 16 to 22.8k. The ordering cost per order is $196 and the carrying cost per unit is $137 (these values will not change with the Tulfillment of the new discount policy). Each unit in Inventory has an average cost of $11. The cost of goods sold equates to 62% of net sales general and administrative expenses represent 18% of net sales, and interest payments of 14% will only be necessary for the increase in the accounts receivable and inventory balances. The firm is in a 30x tax bracket RequiredCakulate the percentage change in earnings after taxes (LAT) between the current discount policy and the new discount policy. Use a 360 day year. Note The term is used to represent thousands ($1.000) Further information: By the end of this problem you are required to establish the percentape difference in EAT between the old policy in before the proposed discount) and the new policy le after the proposed discount). In other words: KA EATEATEATEAT Therefore you proceed with calculating EAT for each discount policy as you normally would under the income statement framework Remember that net sales - Sales - discount Moreover, Interest expense - so when calculating EAT for the old polleyle ESITET! When calculating Eat under the new policy. Sintespincrease in crec Increase in Interest The difference in receivables are after the proposed dhicourt-aceted before the proposed discount. This means that for each discount policy, you must multiply the ave collection period avidally net sales. Similarly, the difference in inventory Sirwatter the proposed discount - $ inv, before the proponend discount Accordingly, you must dulde EOQ2 then multiply the outcome the Save inventory cost per uilt for both discount polley frameworks (ROUND YOUR ANSWER TO 2 DECIMAL PLACES. FOR EXAMPLE 17:23 A company is thinking about changing its credit policy to speed up its cash collections. The present policy calls for a 2/10, net 30 cash discount. The new policy would call for a 5/10 net 50 cash discount Currently, 36% of its customers are taking the discount, and it is anticipated that this number would go up to 51% with the new discount policy. It is further anticipated that annual sales would increase from a level of $456k to $700k asaresult of the change in the cash discount policy. The average Inventory carried by the firm is based on an economic order quantity (EOQI. Assume that unit sales increase from 16 to 22.8k. The ordering cost per order is $196 and the carrying cost per unit is $137 (these values will not change with the Tulfillment of the new discount policy). Each unit in Inventory has an average cost of $11. The cost of goods sold equates to 62% of net sales general and administrative expenses represent 18% of net sales, and interest payments of 14% will only be necessary for the increase in the accounts receivable and inventory balances. The firm is in a 30x tax bracket RequiredCakulate the percentage change in earnings after taxes (LAT) between the current discount policy and the new discount policy. Use a 360 day year. Note The term is used to represent thousands ($1.000) Further information: By the end of this problem you are required to establish the percentape difference in EAT between the old policy in before the proposed discount) and the new policy le after the proposed discount). In other words: KA EATEATEATEAT Therefore you proceed with calculating EAT for each discount policy as you normally would under the income statement framework Remember that net sales - Sales - discount Moreover, Interest expense - so when calculating EAT for the old polleyle ESITET! When calculating Eat under the new policy. Sintespincrease in crec Increase in Interest The difference in receivables are after the proposed dhicourt-aceted before the proposed discount. This means that for each discount policy, you must multiply the ave collection period avidally net sales. Similarly, the difference in inventory Sirwatter the proposed discount - $ inv, before the proponend discount Accordingly, you must dulde EOQ2 then multiply the outcome the Save inventory cost per uilt for both discount polley frameworks (ROUND YOUR ANSWER TO 2 DECIMAL PLACES. FOR EXAMPLE 17:23

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