ABC Corporation is deciding whether to change the credit term from 1/15, n/60 to 2/10, n/40 to
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ABC Corporation is deciding whether to change the credit term from 1/15, n/60 to 2/10, n/40 to speed up cash collections. Its original forecasted sales and average age of receivables are P7,000,000 and 63 days. With the new credit term, sales would decrease by 5% but the average age of receivables will be 42 days. ABC's variable cost rate is 55% while its weighted average cost of capital is 17%. How much is the benefit from the change in average receivable balance?
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