Should the new credit policy be adopted

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An aggresive credit manager has taken over the standar corporation. Currently, sales are about 1.5 million a year with an average collection period of three months. The credit manager believes that by establishing terms of 2/10, net 30, he can reduce the collection period to 20 days, on average. Given that the cost of goods sold represents 80 percent of the selling price, assume that 50 percent of the current sales will take advantage of the discount and that all of the funds recovered from the receivables can be invested at 6 percent.

Problem 1:  Should the new credit policy be adopted? Support the answer with computations.

Reference no: EM132496935

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