Reference no: EM133072215

Fintech INC is reevaluating its credit policy. Current terms are 2f10, net 30, resulting in annual sales of 800,000 units. Cash sales that qualify for the discount account for 10 percent of sales, 55 percent qualify for the discount by paying on the 10th day, and the other 35 percent pay, on average, in 40 days. Unit sales price is $36.00 and variable production costs are $2?.00 per unit. Bad debts are 1.0 percent of credit sales. The new policy of 2110, net 60 is expected to increase sales by 15 percent annually. Cash sales are expected to remain at 10 percent of sales, but those qualifying for the discount by paying in 10 days would drop to 15 percent; the other 7'5 percent would, on average, pay in 7'0 days. It is expected that variable production costs would remain at $2100 per unit but that bad debt expense would increase to 2 percent of credit sales. Fintech INC's banker would continue to ?nance working capital requirements at 13 percent.