Relaxation of credit standards Lewis Enterprises is considering relaxing its credit standards to increase its currently...

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Relaxation of credit standards Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 15% from 11,000 to 12,650 units during the coming year; the average collection period is expected to increase from 50 to 70 days; and bad debts are expected to increase from 1% to 3% of sales. The sale price per unit is $45, and the variable cost per unit is $33. The firm's required return on equal-risk investments is 9.6%. Evaluate the proposed relaxation, and make a recommendation to the firm. (Note: Assume a 365-day year.) The additional profit contribution from an increase in sales is $ (Round to the nearest dollar.) The cost from the increased marginal investment in A/R is $. (Round to the nearest dollar.) The cost from the increase in bad debts is $ (Round to the nearest dollar.) The net profit or loss from implementing the proposed plan is $ (Round to the nearest dollar. Enter a negative number for a loss.) Is the proposed plan recommended? (Select from the drop-down menu.) Relaxation of credit standards Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 15% from 11,000 to 12,650 units during the coming year; the average collection period is expected to increase from 50 to 70 days; and bad debts are expected to increase from 1% to 3% of sales. The sale price per unit is $45, and the variable cost per unit is $33. The firm's required return on equal-risk investments is 9.6%. Evaluate the proposed relaxation, and make a recommendation to the firm. (Note: Assume a 365-day year.) The additional profit contribution from an increase in sales is $ (Round to the nearest dollar.) The cost from the increased marginal investment in A/R is $. (Round to the nearest dollar.) The cost from the increase in bad debts is $ (Round to the nearest dollar.) The net profit or loss from implementing the proposed plan is $ (Round to the nearest dollar. Enter a negative number for a loss.) Is the proposed plan recommended? (Select from the drop-down menu.)