Iris Company is considering lenghtening its credit period from 40 days to 45 days and believes, as a result of this change, its average collection period willincrease from 43 days to 48 days. Bad debt expenses are also expected to increase from 1% to 2% of sales. The firm is currently selling 300,000 units but believes as a result of the change, sales will increase to 345,000 units. On 300,000 units, sales revenue is $4,200,000, variable costs total $3,300,000, and fixed costs are $300,000. The firm has a required eturn on similar-risk investments of 15%. Evaluate this proposed change and make a recommendation to the firm

Iris Company is considering lenghtening its credit period from 40 days to 45 days and believes, as a result of this change, its average collection period will increase from 43 days to 48 days. Bad debt expenses are also expected to increase from 1% to 2% of sales. The firm is currently selling 300,000 units but believes as a result of the change, sales will increase to 345,000 units. On 300,000 units, sales revenue is $4,200,000, variable costs total $3,300,000, and fixed costs are $300,000. The firm has a required return on similar-risk investments of 15%. Evaluate this proposed change and make a recommendation to the firm