What will be the effect of the discount

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Question 1: Tex Ltd. is considering introducing a cash discount. The company's credit terms 'net 45', and would like to change to '1/15 net 45'. The current average collection period is 60 days and is expected to decrease to 30 days with the new credit terms. Fifty percent of customers are expected to take advantage of the new terms. The company's actual sales are Rs6,000,000. If the company requires a return of 20% on investment, what will be the effect of the discount? Assume sales volume will be unaffected by the discount.

Reference no: EM132573665

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