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Business, 24.06.2019 22:50 Aprillove7939

Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks. sales are projected to increase by $160,000 per year if credit is extended to these new customers. of the new accounts receivable generated, 10% are projected to be uncollectible. additional collection costs are projected to be 2% of incremental sales (whether they actually end up collected or not), and production and selling costs are projected to be 78% of sales. your firm expects to pay a total of 40% of its income after expenses in taxes. 1) compute the incremental income after taxes that would result from these projections: 2) compute the incremental return on sales if these new credit customers are accepted: if the receivable turnover ratio is expected to be 4 to 1 and no other asset buildup is needed to serve the new customersā€¦ 3) compute the additional investment in accounts receivable 4) compute the incremental return on new investment 5) if your company requires a 20% rate of return on investment for all proposals, do the numbers suggest that trade credit should be extended to these new customers? explain.

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