Shortening the credit period A firm is contemplating shortening its credit period from 30 to 20...

 

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Shortening the credit period A firm is contemplating shortening its credit period from 30 to 20 days and believes that, as a result of this change, its average collection period will decline from 37 to 28 days. Bad-debt expenses are expected to decrease from 1.7% to 0.9% of sales. The firm is currently selling 11,900 units but believes that as a result of the proposed change, sales will decline to 9,900 units. The sale price per unit is $54, and the variable cost per unit is $44. The firm has a required return on equal-risk investments of 12.5%. Evaluate this decision, and make a recommendation to the firm. (Note: Assume a 365-day year.) The reduction in profit contribution from a decline in sales is $ negative number.) (Round to the nearest dollar. Enter as a Shortening the credit period A firm is contemplating shortening its credit period from 30 to 20 days and believes that, as a result of this change, its average collection period will decline from 37 to 28 days. Bad-debt expenses are expected to decrease from 1.7% to 0.9% of sales. The firm is currently selling 11,900 units but believes that as a result of the proposed change, sales will decline to 9,900 units. The sale price per unit is $54, and the variable cost per unit is $44. The firm has a required return on equal-risk investments of 12.5%. Evaluate this decision, and make a recommendation to the firm. (Note: Assume a 365-day year.) The reduction in profit contribution from a decline in sales is $ negative number.) (Round to the nearest dollar. Enter as a

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