Bluegrass Distilleries, Inc. refuses to extend credit to any wholesale distributors who have a history of being delinquent in repaying credit extended to them. This policy results in lost sales of $10 million annually. Based on past experience with these types of customers, the firm estimates that the average collection period would be 90 days and that the bad-debt loss ratio would be 6 percent. The firm's variable cost ratio is 0.80, making its profit contribution ratio 0.20. Bluegrass Distilleries' required pretax return (i.e., opportunity cost) on receivables investments is 20 percent. When converting from annual to daily data or vice versa, assume there are 365 days per year. Determine the net effect on Bluegrass Distilleries' pretax profits of extending credit to these (previously delinquent) customers. Instructions: Please key in the relevant information in the blue cells in the Data Section. Then type formulas in the yellow cells to determine the net effect on Bluegrass' pretax profits. Data Section Variable cost ratio Required rate of return on current assets investments Additional sales Average collection period Bad-debt loss ratio * *Under the existing policy, the company foregoes $10 million of sales. Thus, sales will increase if the company changes the existing policy. Impact Of Change On Pre-Tax Profits Additional sales Profit contribution of additional sales Additional investment in accounts receivable Cost of additional investment in accounts receivable Additional bad-debt loss Net change in pretax profit