$15$

$01$:$02$:$36$

Whoosh Water Systems is considering extending trade credit to some customers previously considered poor risks.

Sales would increase by $$190,000$ if credit is extended to these new customers. Of the new accounts receivable

generated, $7$ percent will prove to be uncollectible. Additional collection costs will be $5$ percent of sales, and

production and selling costs will be $78$ percent of sales.

a$.$ Compute the incremental income before taxes.

Incremental income before taxes

$

b$.$ What will the firm's incremental return on sales be if these new credit customers are accepted? $($Round the final

answer to $2$ decimal place.$)$

Incremental return on sales

$\%$

c$.$ If the receivable turnover ratio is $5$ to $1,$ and no other asset buildup is needed to serve the new customers, what will

Whoosh Water Systems' incremental return on new average investment be$?($Do round intermediate calculations.

Round the final answer to the nearest whole percentage.$)$

Incremental return on new average investment