Reference no: EM132873610

Question 1: Mehmet Company makes all sales on credit, now is considering offering a 3% cash discount for payment within 10 days. The firm's current average collection period is 45 days, sales are 55,000 units, selling price is $55 per unit, and variable cost per unit is $42. The firm expects that the change in credit terms will result in an increase in sales to 60,000 units, that 80% of the sales will take the discount, and that the average collection period will fall to 30 days. If the firm's required rate of return on equal-risk investments is 15%, should the proposed discount be offered?