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Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $$170,000$ if credit were extended to these new customers. Of the new accounts receivable generated, $5$ percent will prove to be uncollectible. Additional collection costs will be $4$ percent of sales, and production and selling costs will be $76$ percent of sales. The firm is in the $15$ percent tax bracket.

a$.$ Compute the incremental income after taxes.

Incremental income after taxes $$

$$

b$.$ What will Johnson's incremental return on sales be if these new credit customers are accepted? Note: Input your answer as a percent rounded to $2$ decimal places.

Incremental return on sales $$

$$

c$.$ If the accounts receivable turnover ratio is $3$ to $1,$ and no other asset buildup is needed to serve the new customers. what will

Prev.

$16$ of $20$

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