The Boca Grande Company expects to have sales of $10 millions this year under its current operating policies. Its variable costs ratio is 80%, and…

The Boca Grande Company expects to have sales of $10 millions this year under its current operating policies. Its variable costs ratio is 80%, and its cost of short term funds is 16%. Currently Boca Grande’s credit policy is net 25 (no discount for early payment), but its customers pay on average in 30 days. Boca Grande spends $50,000 per year to collect its credit accounts. It collect all receivables (no bad debts), and its marginal tax rate is 40%. All costs associated with the manufacturer of the product and with the credit department’s operations are paid when the product is sold.