Question of working capital

XYZ Ltd. is considering a change of credit policy which will result in a slowing down in the average collection period from one to two months. The relaxation in credit standards is expected to produce an increase in sales in each year amounting to 25% of the current sales volume.
Sales price per unit Rs. 10
variable cost per unit Rs.8.50
Current sales per annum Rs. 2.4 million.
The required rate of return on investment is 20%.
Assume that the 25% increase in sales would result in addition stocks Rs.100,000 and additional creditors of Rs. 20,000.
Required:
Advise the company on whether or not to extend the credit period offered to customer if
a) All customer take the credit of 2 months
b) Existing Customer do not change their payment habits, only new customer take a full 2 months’ credit.