Should the company adopt the policy

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Question - Mark Right Corporation had credit sales last year of $300,000 with terms of 30 days. As the company does not offer a discount for early payment the average collection period is 28 days. Management is looking to improve cash flow by changing the credit policy to 1/10, n/30. They estimate that 75% of customers will take advantage of the discount, reducing the average colleciton period to 15 days. The new discount is expected to increase sales by 5% (the profit margin will stay at the current 15%). The company will use any cash freed up to invest in bonds generating a return of 5%. Should the company adopt the policy? Support your answer by calculating the net change.

Reference no: EM133019946

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