Use the following information to answer the question below.
A firm currently offers credit terms of 2/10, n/30. You want to change the credit policy to 2/10, n/35. As a result of this change, sales are expected to rise by 15%; bad debts will rise from 1% to 3% of sales. All sales are credit sales.
Currently 30% of customers pay off their accounts in 10 days with 69% paying in 30 days and 1% paying in 100 days. The change will not affect the 30% paying early and taking the discount,but, is expected to increase the 1% late payers to 3%. (ie. with the new policy they only expect 67% will pay on the 35 days and 3% will pay in 100 days)

-What will cash be after the increase in sales if cash remains the same percent of sales?
A) $30,000
B) $34,000
C) $33,700
D) $34,500
Correct Answer:
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