Accounts receivable changes without bad debts Tara's Textiles currently has credit sales of $362 million per year and an average collection period of 57 days Assume that the price of Tara's products is 561 per unit and that the variable costs are $54 per unit . The firm is considering an accounts receivable change that will result in a 201% increase in sales and a 19.1% increase in the average collection period No change in bad debts is expected. The firm's equal risk opportunity cost on its investment in accounts receivable is 14 8% (Noto Use a 365-day year) a. Calculate the additional profit contribution from new sales that the firm wilt realize if it makes the proposed change b. What marginal investment in accounts receivable will result? c. Calculate the cost of the marginal investment in accounts receivable d. Should the firm implement the proposed change? What other information would be helpful in your arayo? Initiating a cash discount Gardner Company currently makes all sales on credit and offers no cash discount. The firm is considering offering a 5% cash discount for payment within 15 days. The firm's current average collection period is 60 days, sales are 40,000 units, selling price is 543 per unit and variable cost per unit is $34 The firm expects that the change in credit terms will result in an increase in sales to 45.000 units, that 70% of the sales will take the discount, and that the average collection period wil fall to 30 days. If the firm's required rate of retum on equal-tisk investments is 10% should the proposed discount be offered? Noe Assume a 365-day year Shortening the credit period A fimis contemplating shortening its credit period from 35 to 25 days and believes that, as a result of this change its average collection period will decline from 42 to 31 days Bad-debt expenses are expected to decrease from 14% to 11% of sales. The film is currently selling 12.000 units but believes that as a result of the proposed change, sales will decline to 9,900 units The sale price per unit is $5 and the variable cost per unit is $40 The firm has a required return on equal-risk investments of 128%. Evaluate this decision, and make a recommendation to the firm (Note Assume a 365 day year) Enative number Lockbox system Eagle Industries feels that a lockbox system can shorten its accounts receivable collection period by 2 days Credit sales are $3,400,000 per year billed on a continuous basis. The firm has other equally risky investments with a return of 18%. The cost of the lockbox system is $11,000 per you (ode. Assume a 365 day year a. What amount of cash will be made available for other uses under the lockbox system? b. What net benefit (com) Will the firm reakze itt adopts the lockbox system? Should It adopt the proposed lockbox system