Mine plc has annual credit sales of £15m and allows 90 days’ credit. It is considering introducing a 2 per cent discount for payment within 15 days and reducing the credit period to 60 days.

Mine plc has annual credit sales of £15m and allows 90 days’ credit. It is considering introducing a 2 per cent discount for payment within 15 days and reducing the credit period to 60 days. It estimates that 60 per cent of its customers will take advantage of the discount, while the volume of sales will not be affected. The company finances working capital from an overdraft at a cost of 10 per cent. Is the proposed change in policy worth implementing?

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Mine plc has annual credit sales of £15m and allows 90 days’ credit. It is considering introducing a 2 per cent discount for payment within 15 days and reducing the credit period to 60 days.
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