You are employed as an analyst at the Candy Company of Canada Ltd. (CCC). CCC manufactures candy and sells it to various retailers across the country. You have gathered the following information.
Annual sales ............................................$18,000,000
Gross margin ............................................ 30%
Weighted average cost of capital (WACC) ........ 7%
Average collection period ............................. 60 days
CCC is trying to increase its profits and one of the strategies being considered is a change in the credit terms offered to its customers. Here are four options the company is considering.
Required:
Determine which option will result in the greatest increase in profits. Show all calculations.