The Acme Aglet Corporation has a 12 percent opportunity cost of funds and currently sells on terms

Question:

The Acme Aglet has a 12 percent of funds and currently sells on terms of "net/10, EOM." (This means that goods shipped before the end of the month must be paid for by the tenth of the following month.) The firm has sales of $10 million a year, which are 80 percent on credit and spread evenly over the year. The average collection period is currently 60 days. If Acme offered terms of "2/10, net 30," customers representing 60 percent of its credit sales would take the discount, and the average collection period would be reduced to 40 days. Should Acme change its terms from "net/10, EOM" to "2/10, net 30"? Why?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...