1. ABC Rug Repair Company is trying to decide whether it should relax its credit standards. The firm repairs 72,000 rugs per year at an average price of $32 each. Bad-debt expenses are 1% of sales, the average collection period is 40 days, and the variable cost per unit is $21. Regency expects that if it does relax its credit standards, the average collection period will increase to 48 days and that bad debts will increase to 11 /2% or 5.5% of sales. Sales will increase by 4,000 repairs per year. If the firm has a required rate of return on equal-risk investments of 14%, what recommendation would you give the firm? Use your analysis to justify your answer. (Note: Use a 365-day year.)