Answer ALL questions. [30 MARKS] Read the case study and answer the questions that follow. MANAGING INVENTORIES AND ACCOUNTS RECEIVABLE As a result of the Covid-19 pandemic, the financial position of Empire Limited deteriorated and the company was forced to retrench staff, which included the financial manager whose work performance was also below par. The company faced challenges with the management of inventories and accounts receivable whilst he was at the helm of finance. His duties were taken over by the purchasing manager, who studied for a B Com degree about twenty years ago. Since the purchasing manager did not have up-to-date knowledge pertaining to the field of finance, the company agreed to hire on an ad hoc basis, the services of a consultant who was an expert in the field of working capital management. The consultant found that the company was using the EOQ model which was widely used in industry at the time. He also discovered that the company adhered strictly to this model and did not consider taking advantage of quantity discounts offered by suppliers. He thought that this should change and he discussed the idea with the purchasing manager who asked him to provide the necessary motivation to purchase in greater volumes than the EOQ, with the understanding that quantity discounts would improve profitability. He agreed to do this and added that the company should also consider increasing the discount offered to debtors who settle their accounts within 10 days to improve the debtors collection period which stood at 73 days. A quantitative report was promised by the consultant. The consultant obtained the following information from which he expects to provide his findings to the purchasing manager: The company sells only one product for which there is an annual demand of 72 000 units. The purchase price of the product is R100 per unit and the cost of placing an order is R25. The annual holding cost per unit is estimated at 10% of the unit cost price. The current supplier of the product offers a quantity discount of 6% for a purchase of between 1 000 and 1 999 units. The discount increases to 7% for quantities of between 2 000 and 2 999 units. A discount of 8% is offered for the purchase of quantities of 3 000 units or more. The credit terms of Empire Ltd to its customers are currently 3/10 net 30. The selling price of the product is R150 per unit and the only variable cost is the purchase price of the product. The consultant wants to change the credit terms to 6/10 net 30. As a result of the change in credit terms, the following changes are expected: The debtors collection period is expected to decrease from 73 days to 36.5 days. A credit sales increase from 36 000 units to 48 000 units is anticipated. The bad debts are expected to decrease from 4% of credit sales to 3% of credit sales. Lastly, the percentage of the credit sales to which the discount will apply is likely to increase from 60% to 80%. REQUIRED 1. Calculate the EOQ if discounts are not available. (3 marks) 2. What purchase quantity would the consultant recommend to the purchasing manager if discounts are available? Motivate your answer with the relevant calculations. (13 marks) 3. Determine if Empire Limited should approve of the change in the credit terms to customers from 3/10 net 30 to 6/10 net 30, if the required rate of return on equal-risk investments is 20%. Motivate your answer with the relevant calculations. (Assume that the company will not take advantage of discounts from the supplier.) Ignore the carrying and ordering costs. (10 marks) 4. How much will be the total loss to Empire Limited from the non-payment of accounts by debtors in the current situation, if the cost of capital is 12% and the unpaid accounts are written off after 60 days? (4 marks