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Unformatted text preview: -$46,000.00 Bad Debt Expense: Original -$14,600.00 New --- EBIT $85,400.00 Interest: Original -$15,400.00 New --- EBT $70,000.00 Taxes (40%) -$28,000.00 Net Income $42,000.00 Now make the following assumptions: Assume a 365-day year Current sales are $2,000 per day (all on credit) Variable costs are equal to 80 percent of sales Fixed costs are equal to $46,000 Current days sales outstanding are 30 days, giving an average accounts receivable balance of $60,000 Current bad debt expense is equal to 2 percent of sales Current interest expense is equal to $15,400 The firm's tax rate is 40 percent. The firm is planning to loosen up its credit standard and its credit period....
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- Spring '08