Question: Anisley Elevators Inc. has decided to increase it's sales by opening another location in BC to service office buildings. The firm expects an additional $17
Anisley Elevators Inc. has decided to increase it's sales by opening another location in BC to service office buildings. The firm expects an additional $17 million in sales with the extra location but they also recognize that 8.5% of its sales will ultimately be uncollectible. In addition, collection costs will increase to 13% on all new sales and the firm's service costs will be 68% of sales. Selling expenses are 8% of sales and Laptech has an opportunity cost of funds (before tax) of 11%. Laptech can turn its receivables 5 times per year. Is it worthwhile for Ainsley to open the second location in BC ? (Hint: Calculate the incremental change in benefits from a change in credit policy)
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