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Determining the expected change in pretax profit

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Currently your firm has an average collection period of 67 days and your have been asked to analyze offering a 1/10 net 30 discount to expedite collections. You expect a decrease in the ACP of 9 days (the new ACP would be 58 days). 40% of the customers are expected to take the discount. The current accounts receivable balance is 3.35 million. Sales levels and bad debt expenses are expected to remain constant. Using a 365 day year for your calculations, if the required rate of return on receivables is 14%, what is the expected change in pretax profit?

Reference no: EM133056421

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