A company has credit sales of 20,00,000 with an average collection period of 35 days. It wants to liberalize its existing credit terms which are…

A company has credit sales of 20,00,000 with an average collection period of 35 days. It wants to liberalize its existing credit terms which are expected to increase sales to 25,00,000. However, average collection period is expected to decline to 10 days. Profit Volume ratio is 20% and opportunity cost (post-tax) is 6%. Tax rate is 40%. Assume 360 days in a year. What is the incremental investment in debtors and its impact on post-tax profitability? Incremental Investment in debtors Impact on Post -tax profitability (A) ₹(1,25,000) 7,500 (B) ₹(1,00,000) ₹(6,000) (C) ₹(1,25,000) ₹(7,500) (D) ₹(1,00,000) 6,000