Credit Policy Decisions

Credit Policy - = 28 c Collins should liberalize credit because the yield of 28 is higher than the required aftertax return of 15 d Accounts

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Credit Policy Decisions 17. a. Accounts receivable = b. Additional sales $80,000 Accounts uncollectible $ 7,200 Annual incremental revenue $72,800 Collection costs (9% of new sales) $ 4,000 Production and selling costs (78% of new sales) $62,400 Annual income before taxes $ 6,400 Taxes (30%) $ 1,920 Annual incremental income after taxes $ 4,480 Return on incremental investment is
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Unformatted text preview: = 28% c. Collins should liberalize credit because the yield of 28% is higher than the required aftertax return of 15%. d. Accounts receivable = Inventory $20,000 Accounts receivable $16,000 Incremental investment $36,000 Return on investment is e. Collins should not extend more liberal credit terms because 12.44% is less than the required aftertax return of 15%....
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This document was uploaded on 10/17/2010.

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