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Klein's Tools is considering offering a cash discount to speed up the collection of accounts receivable. Currently the firm has an average collection period of 69 days, annual sales are 34,000, the per-unit price is $43?, and the per-unit variable cost is $32. A 3% cash discount is being considered. Klein's Tools estimates that 76% of its customers will take the 3% discount. If sales are expected to rise to 36,000 units per year and the firm has a 14% required rate of return, what minimum average collection period is required to approve the cash discount plan?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92354482

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