=+LG 5 P15–13 Lengthening the credit period Kitchen Enterprises is evaluating a proposal to lengthen its credit period from 30 to 45 days. All customers will continue to pay on the net date. Currently, credit sales are $650,000 and variable costs are $455,000. The selling price is $20 per unit. The proposal is expected to lead to credit sales of $710,000.

However, bad debts are expected to increase from 1% to 2% of sales. The required rate of return on equal-risk investments is 16.5%. (Note: Assume a 365-day year.)