What is the incremental after-tax profit associated with the change in credit terms? Should the company make
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What is the incremental after-tax profit associated with the change in credit terms? Should the company make the change? (Assume a tax rate of 40 percent.)
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Old Difference New Gross sales $1,000,000 Less discounts Net sales $1,000,000 Production costs 750,000 Profit before credit $ 250,000 Costs and taxes Credit-related costs: Carrying costs 7,890 Bad debt losses 20,000 $ 222,110 Profit before taxes Taxes (40%) 88,844 $ 133,266 Net income | |
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The income statements and differentials under the two credit policies are shown below Thus if expect...View the full answer
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Financial management theory and practice
ISBN: 978-0324422696
12th Edition
Authors: Eugene F. Brigham and Michael C. Ehrhardt
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