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Iris Company is considering lengtening its crediot period from 40 days to 45 days and believes, as a result of this change, its average collection
Iris Company is considering lengtening its crediot period from 40 days to 45 days and believes, as a result of this change, its average collection period will increase from 40 days to 45 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 change, sales will increase to 325,000 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 requried return on similar-risk investments of 12%. Evaluate this proposed change and make a recommendation to the firm
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