Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although these customers will provide $468,000 in additional credit sales, 11 percent are likely to be uncollectible. The company will incur $17,700 in additional collection expenses. Production and marketing expenses represent 76 percent of sales. The company has a receivables turnover of five times. No other asset buildup will be required to service the new customers. The firm has a 17 percent desired return on investment.

Calculate the incremental income before taxes from this new group of customers.

Annual income before taxes

$

a-2.	Calculate the return on incremental investment.(Round the final answer to 2 decimal place.)

Return on incremental investment

%

a-3.	Should Cominsky extend credit to these customers?
	Yes No

b-1.	Calculate the incremental income before taxes from the new group of customers if 14 percent of the sales prove uncollectable.

Incremental income before taxes

$

b-2.	Calculate the return on incremental investment if 14 percent of the new sales prove uncollectible.(Round the final answer to 2 decimal place.)

Return on incremental investment

%

b-3.	Should credit be extended if 14 percent of the new sales prove uncollectible?
	Yes No

c-1.	Calculate the return on incremental investment if the receivables turnover drops to 1.6, and 11 percent of the accounts are uncollectible (as in parta)?(Round the final answer to 2 decimal places.)

Return on incremental investment

%

c-2.	Should credit be extended if the receivables turnover drops to 1.6 and 11 percent of the accounts are uncollectible (as in parta)?

	Yes No