a question. Thank you sir!

The Original question and answer are attached:

Low and Price Ltd has annual credit sale of $12,000,000, and three months are allowed for payment. The company decides to offer a 2% discount for payments made within ten days of the invoice being sent, and to reduce the maximum time allow for payment to two months. It is estimated that 50% of the customer will take the discount. If the company requires a 20% return on investments, what will be the effect of the discount if the cost per unit is $9 and the selling price is $10? Assume that the volume of sales will be unaffected by the discount.

Answer:

(a) the volume of debtors, if the company policy remains unchanged, would be
3/12 x $12,000,000 = $3.000.000
(b) if the policy is changed, the volume of debtors would
10/360 x 50% x $12,000,000 + 2/12 x 50% x $12,000,000 = $166,667 + $1,000,000 = $1,166,667
(c) there will be a reduction in debtors of $1,833,333($-$)
(d) since the company can invest at 20% a year, the value of a reduction in debtors (a source of funds) is 20% of $1,833,333 each year in perpetuity, that is, $366,667 a year
(e) summary
value of reduction in debtors each year $366,667
less discount allowed each year (2% x 50% x$12,000,000) $120,000
Net benefits of new discount policy each year $246,667

in (b):
(b) if the policy is changed, the volume of debtors would
10/360 x 50% x $12,000,000 + 2/12 x 50% x $12,000,000
Why the 2/12 x 50% x $12,000,000 should not *98%?
As the question mentioned, there will be a 2% discount so the company only could receive 98% of the 2/12 x 50% x $12,000,000.

Thank you !