Computation of Trade Receivables

Annual turnover (given) : $4000000
Current level of debtors (given) : $550000

Velm Plc is considering offering a discount of 1% to customers paying within 14 days. the company also expects that offering a discount for early payment will reduce the average credit period taken by its customers to 26 days. twp-third of customers are expected to take advantage of the discount.

Question:
Which is the correct way to find the proposed level of debtors?

alternative 1 :
Cost of 1 % discount = $4m x 1% x 2/3 = $26,667
Proposed level of debtors = ($4m – $26,667) x (26/365) = $283031

alternative 2 :
Average collection period = (2/3 x 14) + (1/3 x 26) = 18 days
Proposed level of debtors = ($4m x 18) / 365 = $197260