Question
Mango Mania's gross profit margin is approximately 40%, and the opportunity cost of capital is 15%. The company wishes to expand to selling to
Mango Mania's gross profit margin is approximately 40%, and the opportunity cost of capital is 15%. The company wishes to expand to selling to businesses, who pay on credit. Therefore, there is the plan to grant special credit terms to its new customers. The following information relates to new customers only: 2% Bad debts percentage Collection period 45 days Assume there are 360 days in each year. The projected incremental annual sales for the new business customers is $700,000. Should credit be extended to the new customers? Show your workings clearly. (7 marks)
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Income Tax Fundamentals 2013
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