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1.- ABC company manufactures videogames. Each videogame has a price of $15 each and a variable cost of $12. This company is analyzing the possibility
1.- ABC company manufactures videogames. Each videogame has a price of $15 each and a variable cost of $12. This company is analyzing the possibility of giving more credit to their customers to increase the sales from 130.000 units to 160.000 units. However, this credit relaxation would increase the average collection period from 35 days to 45 days. It will mean then that they'll need more investment in working capital to keep going on, and the expected return on any investment is the 14%. The bad debts are meant to increase as well from 1% to 3% of the sales. Calculate the following: 1.- The benefits in detail) 2.- the costs (in detail) 3.- The net result 4.- Your decision. Note: do and write the whole exercise to prove your numbers and decisions
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