Assignment: Determine the expected change in before-tax profit for the proposed change in credit standards. Prepare the income statements in total, not per unit. The following information should be used in your analysis. 1. Sales occur evenly throughout the year. 2. The firm is currently operating under-capacity. 3. Opportunity cost of Inventory Investment= Change in Annual Sales x COGS \% X r Annual Inventory Turnover Karen's Canoes is considering relaxing its credit standards to encourage more sales. As a result, sales are expected to increase 15% from 300 canoes per year to 345 canoes per year. The average collection period is expected to increase to 40 days from 30 days and bad debts are expected to double the current level (as a \% of sales). To support the higher sales level, an increase in the level of inventory will be necessary. The firm's required return on investment is 6% and their annual inventory turnover is 3 times. Their COGS \% is 58.33%