Birat Trading Company (BTC) is considering changing its credit terms from 'net 40' to 'net 50', in order to increase sales. At present, average…

Birat Trading Company (BTC) is considering changing its credit terms from 'net 40' to 'net 50', in order to increase sales. At present, average collection period is 45 days and it will be 60 days under proposed plan. The change will also affect in the present 2 percent level of bad debt to 2.5 percent on all credit sales. Due to change in credit terms, it is expected to increase in sales from Rs 6 million to Rs 7.2 million per year. The variable cost ratio is 70 percent, the cost of funds invested in accounts receivable is 10 percent, and the marginal corporate tax rate is 30 percent. Should BTC change its credit terms?