Medi Island Company has projected current sales (all on credit) of 60,000 units at a selling price of $28 per unit. Selling expenses are 83% of the selling price. The company is considering changing its current credit policy of Net 30 Days to Net 45 days. The average collection period is currently 25 days. The change in policy is Expected to increase sales by 5%. In addition, the change in policy is expected to increase the average collection period to 45 days.

The company has a desired rate of return of 15%. Should they adopt the new credit policy?

Answer rating: 100% (QA)

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