Lengthening the credit period Parker Tool is considering lengthening its credit period from 30 to 60 days. All customers will continue to pay on the net date. The firm currently bills $420,000 for sales and has $305,000 in variable costs. The change in credit terms is expected to increase sales to $540,000. Bad-debt expenses will increase from 1% to 1.5% of sales. The firm has a required rate of return on equal-risk investments of 20%. (Note: Assume a 365-day year.) a. What additional profit contribution from sales will be realized from the proposed change? b. What is the cost of the marginal investment in accounts receivable? c. What is the cost of the marginal bad debts? d. Do you recommend this change in credit terms? a. The additional profit contribution from an increase in sales is $ . (Round to the nearest dollar.) b. The interest cost of the marginal investment in A/R is $ . (Round to the nearest dollar.) C. The cost of the marginal bad debts is $ . (Round to the nearest dollar.) d. The net profit from the proposed change in credit terms is $ . (Round to the nearest dollar.) Do you recommend this change in credit terms? (Select the best answer below.) O O No Yes Lengthening the credit period Parker Tool is considering lengthening its credit period from 30 to 60 days. All customers will continue to pay on the net date. The firm currently bills $420,000 for sales and has $305,000 in variable costs. The change in credit terms is expected to increase sales to $540,000. Bad-debt expenses will increase from 1% to 1.5% of sales. The firm has a required rate of return on equal-risk investments of 20%. (Note: Assume a 365-day year.) a. What additional profit contribution from sales will be realized from the proposed change? b. What is the cost of the marginal investment in accounts receivable? c. What is the cost of the marginal bad debts? d. Do you recommend this change in credit terms? a. The additional profit contribution from an increase in sales is $ . (Round to the nearest dollar.) b. The interest cost of the marginal investment in A/R is $ . (Round to the nearest dollar.) C. The cost of the marginal bad debts is $ . (Round to the nearest dollar.) d. The net profit from the proposed change in credit terms is $ . (Round to the nearest dollar.) Do you recommend this change in credit terms? (Select the best answer below.) O O No Yes