Fenty Company is thinking about extending trade credit to new customers. This will increase the annual sales by $350,000 if credit is extended to these customers. Of the new accounts receivable related to these sales, 8% will be uncollectible. Additional collection costs will be 6% of sales. Besides, production and selling costs will be 75% of sales. The company is in a 30% tax bracket.

11. What is the amount of additional collection costs? *

a-$21,000

b-$28,000

c-$87,500

d-$350,000

e-None of the above

12. What is the profit on the new sales? *

a-$26,950

b-$38,500

c-$262,500

d-$350,000

e-None of the above

13. What is the percentage return on the new sales? *

a-6%

b-7.70%

c-8%

d-11%

e-None of the above

14. What is the amount of the new investment in accounts receivable if the accounts receivable are turned over 3.5 times a year? *

a-$28,000

b-$87,500

c-$100,000

d-$262,500

e-None of the above

15. What is the return on investment, assuming that the only new investment will be in accounts receivable? *

a-6%

b-11%

c-26.95%

d-44%

e-None of the above