A company wants to fix its credit policy. It is considering on three alternatives as...
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A company wants to fix its credit policy. It is considering on three alternatives as under:- 1. sale on 15 days credit at 5% cash discount, or 2. sale on 1 month credit without cash discount, or 3. sale on 2 months credit without cash discount In (1) above additional sales would be N$100000; in (2) N$300000 and in (3) N$700000. Collection charges will be in (1) 2%, (2) 5% and (3) 10% of sales. Bad debts are expected at 2%,4%, and 10% respectively. Assuming interest on investment @ 12\% per annum. Required: State which policy should be adopted. Show all your workings. ( 25 marks)
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