McGill Inc

question 47

Essay

McGill Inc.is considering adopting a new credit policy of 3/10 net 30 instead of net 30 days.The firm estimates that 30 percent of the customers will take advantage of the discount, while the remaining 70 percent will pay on day 30.The selling price is $85 per unit and the unit sales are estimated to be 9,000 per year.The after-tax discount rate is 5% and the tax rate is 40%.Should the firm switch to the new policy?

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