CURRENT SITUATION FOR DYL PICKLE COMPANY:

So = Current sales = $15 million. V = Variable costs as a % of sales = 70% = 0.7. 1 - V = Contribution margin = 30% = 0.3. k = Cost of capital invested in receivables = 15% = 0.15. ACPo = Average collection period = 30 days. (Note: the credit period is 25 days, i.e., net 25.) Bo = Bad debt loss percentage = 3% = 0.03. Do = Discount percentage = 0%. Toughen up on collection policy. New ACP will be 25 days. DS = -$1 million. Bo will go from 3% to 1%.

What are the answers to the following questions?

1. What is the change in Investment? (Enter your answer as a whole number)

2. What is the change in profits? (Enter your answer as a whole number)

3. What is the NPV of the proposed change? (Enter your answer as a whole number)

4. Should the change be made?