Atarren Medial Supplies Company sells $30 million of itsproducts to wholesalers

Atarren Medial Supplies Company sells $30 million of itsproducts to wholesalers on terms of net 30. Currently the firmsaverage collection period is 48 days. In an effort to speed up thecollection of receivables Warrenis considering offering a cashdiscount of 2 percent if customers pay their bills within 10 days.The firm expects 50 percent of its customers to take the discountand its average collection period to decline to 30 days. Thefirms required pretax return (i.e. opportunity cost) onreceivables investment is 16 percent. Determine Warrens pretaxearnings on the funds released from the reduction in receivables.(Assume a 365 day year)