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Implementing the proposed plan

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Currently, ABC Ltd sell only on credit and do not offer cash discounts. Management is considering offering a 10% discount for payment within 7 days. Currently, the average collection period is 30 days, sales are 30,000 units, selling price is $50 per unit, and variable cost per unit is $25. If the discount is implemented, it is expected that sales will increase to 36,000 units, that 90% of sales will take the discount, and the average collection period will fall to 10 days. The firm's required rate of return is 10%. What is the net benefit/loss from implementing the proposed plan? Note, use a 365-day year.

Reference no: EM132548221

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