Initiating a cash discount Gardner Company currently makes all sales on credit and offers no...
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Initiating a cash discount Gardner Company currently makes all sales on credit and offers no cash discount. The firm is considering offering a 3% cash discount for payment within 15 days. The firm's current average collection period is 60 days, sales are 40 000 units, selling price is $45 per unit and variable cost per unit is $33. The firm expects that the change in credit terms will result in an increase in sales to 42,000 units that 70% of the sales will take the discount, and that the average collection period will fall to 30 days. If the firm's required rate of retum on equat-risk investments le 10% should the proposed discount be offered? (Note Assume a 365 day year) The additional profil contribution from additional sales is $1 Round to the nearest dollar)
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