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Effect of Changing a Company's Credit Terms

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The Dunstill company has obtained the following information:
? Annual Credit Sales= 30 million
? Collections period is= 60 days
? Credit terms= Net 30 days
? Interest rate = 12%
The company is considering changing its credit terms to 4/10 net 30. The company anticipates 50% of the customers will take advantage of this policy and that the collection period will drop by 30 days. Should the company make this change?

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The response provides the detailed steps to find the effect of Changing a Company's Credit Terms

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We have to do the cost benefit analysis:

Cost of the discount= Discount * Value of discounted Sales
...

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