A change in credit policy

See page 104BBP Text 2016-117 Russian Beard Co is considering a change of credit policy which will result in an increase in the average collection period from one to two months. The relaxation in credit is expected to produce an increase in sales in each year amounting to 25% of the current sales volume. Selling price per unit $10 Variable cost per unit $8.50 Current annual sales $2,400,000 The required rate of return on investments is 20%. Assume that the 25% increase in sales would result in additional inventories of $100,000 and additional accounts payable of $20,000. Advise the company on whether or not to extend the credit period offered to customers, if: (a) All customers take the longer credit of two months (b) Existing customers do not change their payment habits, and only new customers take a full two months' credit Cannot figure parts of the solution. I am lost. Thanks