1. What is the amount of additional collection costs? * 2.What is the profit on the new sales? 3.What is the percentage return on the new sales? * 4. What is the amount of the new investment in accounts receivable if the accounts receivable are turned over 5 times a year? * 5. What is the return on investment, assuming that the only new investment will be in accounts receivable? *

Randy Company is thinking about extending trade credit to new customers. This will increase the annual sales by $400,000 if credit is extended to these customers. Of the new accounts receivable related to these sales, 10% will be uncollectible. Additional collection costs will be 8% of sales. Besides, production and selling costs will be 85% of sales. The company is in a 40% tax bracket