Instruction to Chegg Solver : Must be solved with Documents( Word pad, Notepad...) or convertible to Ms. word or excel, other wise hand written will not be preferred.

Question:

To increase sales from their present annual $10 million, Nike Company, may try more liberal credit standards. Currently, the firm has an average collection period of 45 days. It believes that, with increasingly liberal credit standards, the following will result: CREDIT POLICIES A B D E 1.25 1.0 0.75 0.50 Increase in Sales from previous $1.75 level ( in million) Average collection period for 60 increment sales (days) 75 90 120 150 The prices of its products average $50 per unit, and variable costs average $45 per unit. No bad-debt losses are expected. If the company has a pre-tax opportunity cost of funds of 35 percent, which credit policy should be pursued? Why? (Assume a 360-day year.) To increase sales from their present annual $10 million, Nike Company, may try more liberal credit standards. Currently, the firm has an average collection period of 45 days. It believes that, with increasingly liberal credit standards, the following will result: CREDIT POLICIES A B D E 1.25 1.0 0.75 0.50 Increase in Sales from previous $1.75 level ( in million) Average collection period for 60 increment sales (days) 75 90 120 150 The prices of its products average $50 per unit, and variable costs average $45 per unit. No bad-debt losses are expected. If the company has a pre-tax opportunity cost of funds of 35 percent, which credit policy should be pursued? Why? (Assume a 360-day year.)