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 15% from 12,000 to 13,800 units during the coming year; the average collection period is expected to increase from 35 to 55 days; and bad debts are expected to increase from 3% to 5% of sales. The sale price per unit is $36, and the variable cost per unit is $24. The firms required return on equal-risk investments is 24.9%. Evaluate the proposed relaxation, and make a recommendation to the firm. (Note: Assume a 365-day year.

The additional profit contribution from an increase in sales is $___.

The cost from the increased marginal investment in A/R is $___. The cost from the increase in bad debts is $___.

The net profit or loss from implementing the proposed plan is $___.

Is this proposed plan recomended? Yes or No