INFORMATION DBV Inc. offers its customers 30 days credit but, at present, customers are taking...
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INFORMATION DBV Inc. offers its customers 30 days credit but, at present, customers are taking an average of 40 days credit. In order to speed up cash collection, the company is considering introducing a 1% discount for payment within 10 days. The company finances its working capital requirement using an overdraft at an annual cost of 9%.
Required: Calculate the annual cost of offering the discount and evaluate whether or not the discount should be offered.
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