$2.$Credit Policy Evaluation $[$LO$2]$ The Johnson Company sells $2,400$ pairs of

running shoes per month at a cash price of $$99$ per pair. The firm is considering

a new policy that involves $30$ days' credit and an increase in price to $$100$ per pair

on credit sales. The cash price will remain at $$99,$ and the new policy is not

expected to affect the quantity sold. The discount period will be $20$ days. The

required return is $\mathrm{.}75$ percent per month.

a$.$ How would the new credit terms be quoted?

b$.$ What investment in receivables is required under the new policy?

c$.$ Explain why the variable cost of manufacturing the shoes is not relevant

here.

d$.$ If the default rate is anticipated to be $8$ percent, should the switch be made?

What is the break$-$even credit price? The break$-$even cash discount?