Netal Ltd has annual sales of 50 million rand, all of which are on credit. The current collection period is 45 days, and the credit terms are net 30. The company is considering offering terms of 2/10, net 30. It anticipates that 70 per cent of its customers will take advantage of the discount. The new policy will reduce the collection period to 28 days.

The appropriate interest rate is 6 per cent. Should the new credit policy be adopted? How does the level of credit sales affect this decision?