25.4 Collection Effort Manish Ventures is considering relaxing its collection efforts. Presently its sales are 50 million, its average collection period 25 days, its variable costs to sales ratio 0.75 its cost of capital 15 percent, and its bad debt ratio 0,04. The relaxation in collection efforts is expected to push sales up by 2 6 million, increase the average collection period to 40 days, and raise the bad debts ratio to 0.06. The tax rate of the firm is 30 percent. What will be the effect of relaxing the collection effort on the residual income of the firm