The additional profit contribution from additional sales

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Initiating a cash discount; a company is considering offering a 1% discount for payment within 15 days, the current average collection period is 60 days. Sales are 40,000 units and the selling price is $42 per unit. Variable cost per unit is $31. Thefirm expects that the change in credit terms will result in an increase in sales to 43,000 units. That 70% of the sales will take the discount and average collection period will fall to 30 days. If the firms required rate of return on equal-risk investments is 25% should the proposed discount be offered?

The additional profit contribution from additional sales is $___.

Reference no: EM131087962


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