Question: Problem 7-20 Credit policy decision with changing variables (L07-4) Slow Roll Drum Co. is evaluating the extension of credit to a new group of customers.
Problem 7-20 Credit policy decision with changing variables (L07-4) Slow Roll Drum Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide $144.000 in additional credit sales, 10 percent are likely to be uncollectible. The company will also incur $16,000 in additional collection expense. Production and marketing costs represent 71 percent of sales. The firm is in a 35 percent tax bracket. No other asset bulldup will be required to service the new customers. The firm has a 12 percent desired return. Assume the average collection period is 72 days a. Compute the return on incremental investment (Input your answer as a percent rounded to 2 decimal places. Use a 360-day year.) Retum on incremental investment %
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