You manage your firm's accounts receivable and are dissatisfied with the current credit policy. You are analyzing two alternative plans, shown below.

Required:
Recommend, with supporting calculations, which proposed plan is better.

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Current Proposed Plan nB0 $10,000,000 5% Annual sales % cash sales % of credit sales to have discount taken Average collection period Interest rate on line of credit Bad debts Credit administration savings 3/30/n60 $10,000,000 10% 50% 80 8% $270,000 $5,000 5/20/n50 $10,000,000 25% 60% 70 8% $250,000 $7,000 90 8% $300,000 for those not taking the discount