Reference no: EM131615861

First picked fruits is considering two alternatives to stimulate sales. currently, the policy is to net 30 and the average collection period is 40 day, with bad debt losses of 1.25% of sales. all sales are credit sales and are expected to be $6.1 million annually under this period. They are considering two new policies, under policy 1 credit terms would be lengthened to 45 days to a select group of customers with an expected increase in sales to $6.9 million annually. However, it is expected that the incremental sales would experience bad debt losses of 1.75% and that the average collection period or bad debt loss experience on the existing credit sales. under policy 2 credit terms would be lengthened to60 days to a select group of customers not completely overlapping with the first group) sales would be expected to rise to $7.2 million annually. incremental sales expectations would be payment on average collection period or bad debt losses on the original credit sales. first picked fruits has an opportunity cost of funds of 16% and its variable costs are 94% of sales. a) is either alternative advantageous? b) any concerns with the analysis as stated? c) any theoretical concern with an apparent on year time horizon for analysis?