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Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to

Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 5% from 10 comma 000 to 10 comma 500 units during the coming year; the average collection period is expected to increase from 30 to 45days; and bad debts are expected to increase from 2.5% to 4% of sales. The sale price per unit is $ 35, and the variable cost per unit is $ 24. The firm's required return on equal-risk investments is 9.3%. Evaluate the proposed relaxation, and make a recommendation to the firm.(Note: Assume a365-day year.)

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