Question: Problem 7-20 (Algo) Credit policy decision with changing variables [LO7-4] Slow Roll Drum Compary is evaluating the extension of credit to a new group of

Problem 7-20 (Algo) Credit policy decision with changing variables [LO7-4] Slow Roll Drum Compary is evaluating the extension of credit to a new group of customers. Although these customers will provide $234.000 in additional credit sales, 15 percent are likely to be uncollectible The company will also incur $16.500 in additional collection expense. Production and marketing costs represent 70 percent of sales. The firm is in a 30 percent tax bracket. No other asset buidup will be required to service the new customers. The firm has a 10 percent desired return. Assume the average collection period is 180 days. a. Compute the return on incremental investment. Note: Input your answer as o percent rounded to 2 decimal ploces. Use o 360-day year. b. Should credit be extended to the new group of customers

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