Last year a firm had a DSO of 35 days and annual revenues equal to $10,000,000. The treasury department has made it a goal to reduce the DSO to 30 days, while holding constant revenues. If this reduction is realized, then calculate the following:
Assume the firm uses the cash flow freed up by the reduction in DSO to reduce borrowed funds. If the interest rate on the firm's borrowed funds is 4.5% p.a., by how much will the annual interest paid by the firm be reduced?