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ABC is considering relaxing its credit standards. It expects the proposal will increase sales by 20% from $10 million.

ABC is considering relaxing its credit standards. It expects the proposal will increase sales by 20% from $10 million. The ACP will increase from 35 to 50 days, and bad debts are expected to increase from 2% of sales to 7%. Variable costs are 60% of sales and fixed cost are $3.5 million a year. The opportunity cost is 16%. Assume a 365 day a year. Determine the net profit (loss) of the proposal.
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Dear Student, Dear Student, Please check the attached... View the full answer

CH030510_502631_fin(3).xlsx

Statement of proposal evaluation
particulars
Incremental sales
Less:
bad debts
variable costs
opprtunity costs
net gain amount $
2000000
100000
1200000
13151
686849 since there is a net gain of...

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