EBK PEARSON ETEXT PRINCIPLES OF MANAGER
EBK PEARSON ETEXT PRINCIPLES OF MANAGER
15th Edition
ISBN: 9780136846901
Author: SMART
Publisher: VST
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Chapter 15, Problem 15.10P

Relaxation of credit standards Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 10% from 10,000 to 11,000 units during the coming year, the average collection period is expected to increase from 45 to 60 days, and bad debts are expected to increase from 1% to 3% of sales. The sale price per unit is $40, and the variable cost per unit is $31. The firm’s required return on equal-risk investments is 10%. Evaluate the proposed relaxation, and make a recommendation to the firm. (Note: Assume a 365-day year.)

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EBK PEARSON ETEXT PRINCIPLES OF MANAGER

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