08-06-2010, 04:58 PM
Good Day all,
My question is as follows
G LTD makes sales on credit and offers no discount.G is considering offering a 2% cash discount for payment within 15days.The current average collection period is 60 days,sales are 40 000units,sellint price is R45 per unit,variable cost per unit is R36.The firms expects that the change in credit terms will result in an increase in sales to 42 000units,that 70% of the sales will take the discount, and that the average collection period will fall to 30days. The firms required rate of return on equal-risk investments is 25%.
Should the proposed discount be offered?
Any one who can assist me in explainint this ,i will appreciate it very much.
Many thanks
Flora
My question is as follows
G LTD makes sales on credit and offers no discount.G is considering offering a 2% cash discount for payment within 15days.The current average collection period is 60 days,sales are 40 000units,sellint price is R45 per unit,variable cost per unit is R36.The firms expects that the change in credit terms will result in an increase in sales to 42 000units,that 70% of the sales will take the discount, and that the average collection period will fall to 30days. The firms required rate of return on equal-risk investments is 25%.
Should the proposed discount be offered?
Any one who can assist me in explainint this ,i will appreciate it very much.
Many thanks
Flora
