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Assignment 2 - Problem 2 ABC Inc. is proposing a change in its credit policy to increase sales oi Product XYZ Existing terms is H10, net 30 New terms is 2'20, net 40 New sales level {all cretit sales) 3 24.000.90.11 Original sales level {all credit sales} $ 20300.net! Contribution Marg'n ration 30% |it:trieniliilehllost-.iesonne'irvealeelevel 5% '36 bad debt losses on original sales travel 2% New average collection period {days} 26 Original average collection period {days} 15 Cost at Capital 10% CostofGoo-dssoldasaperoentageolsales 60% ABC also anticipates to have keep additional inventory. The inventory turnover rate would improve with new sales. Inventory tumover on new les level 10 Inventory turnover on original sales level 5 Financing cost let Working Capital is 10% Tax rate 40% Current Liabilities for XYZ zero dollars Before credit policy changes. 75% of the customers takes the early payment discount. Anticipate only 713% of the customers would take the discount alter the change. What is net annual benefit of changing to the new cretit policy