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 10% from 14,000 to 15,400 units during the coming year; the average collection period is expected to increase from 50 to 70 days; and bad debts are expected to increase from 1% to 3% of sales. The sale price per unit is $37, and the variable cost per unit is $27. The firm's required return on equal risk investments is 10.7%. 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