Question: I need help solving Fast Turnstiles Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide $504,000

 I need help solving Fast Turnstiles Co. is evaluating the extension

I need help solving

of credit to a new group of customers. Although these customers will

Fast Turnstiles Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide $504,000 in additional credit sales, 13 percent are likely to be uncollectible. The company will also incur $17,900 in additional collection expense. Production and marketing costs represent 70 percent of sales. The firm is in a 35 percent tax bracket and has a receivables turnover of five times. No other asset buildup will be required to service the new customers. The firm has a 8 percent desired return. a-1. Calculate the incremental income after taxes. Incremental income after taxes a-2. Calculate the return on incremental investment. (Input your answer as a percent rounded to 2 decimal places.) Return on incremental investment % a-3. Should Fast Turnstiles Co. extend credit to these customers? Yes NO b-1. Calculate the incremental income after taxes if 16 percent of the new sales prove to be uncollectible. Incremental income after taxes b-2. Calculate the return on incremental investment if 16 percent of the new sales prove to be uncollectible. (Input your answer as a percent rounded to 2 decimal places.) Return on incremental investment b-3. Should credit be extended if 16 percent of the new sales prove uncollectible? Yes NO c-1. Calculate the return on incremental investment if the receivables turnover drops to 1.6 and 13 percent of the accounts are uncollectible. (Input your answer as a percent rounded to 2 decimal places.) Return on incremental investment % c-2. Should credit be extended if the receivables turnover drops to 16 and 13 percent of the accounts are uncollect No Yes

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