Kenson Co. is a highly successful supplier of textiles to manufacturers in the clothing industry. Kenson is considering expanding its client base. In doing so
Kenson Co. is a highly successful supplier of textiles to manufacturers in the clothing industry. Kenson is considering expanding its client base. In doing so it is estimated that they could bring in additional annual sales of $800,000. It is anticipated however that 10% of those accounts will be uncollectible. The cost of procuring the textiles is 60% of sales. Kenson has a receivables turnover of 8 times a year and its opportunity cost of funds (before-tax) is 20%. Selling expenses are 8% of sales and collection costs are collection costs are 3% of sales. Should Kenson undertake the expansion?
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