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Part 1
Initiating a cash discount   Gardner Company currently makes all
sales on credit and offers no cash discount. The firm is
considering offering a
1​%
cash discount for payment within 15 days. The​ firm's
current average collection period is
60
​days, sales are
40,000
​units, selling price is
​$43
per​ unit, and variable cost per unit is
​$35.
The firm expects that the change in credit terms will result in
an increase in sales to
43,000
​units, that
70​%
of the sales will take the​ discount, and that the average
collection period will fall to
30
days. If the​ firm's required rate of return
on​ equal-risk investments is
25​%,
should the proposed discount be​ offered?  
​(Note​:
Assume a​ 365-day year.)
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Part 1
The additional profit contribution from additional sales is
​$enter your response here.
​ (Round to the nearest​ dollar.)
Part 2
The amount of cost that will be saved due to the reduction in
average​ A/R is
​$enter your response here.
  ​(Round to the nearest​ dollar.)
Part 3
The cost of extending the cash discount to customer is
​$enter your response here.
  ​(Round to the nearest​ dollar.)
Part 4
The net profit from the proposed cash discount is
​$enter your response here.
  ​(Round to the nearest​ dollar.)
Part 5
Should the proposed cash discount be​ offered?  ​(Select
the best answer​ below.)
Yes
No