Microsoft. Inc contemplating two alternatives to manage their working capital. The first alternative is by relaxing its credit standards to encourage more sales. It reported total sales of USD 1,500,000 with 75% of the sales of credit. It takes 50 days to collect accounts receivable. The management is currently investigating a change in collection period which expected to result in a 15% increase in credit sales and a 10% increase in the average collection period. Bad debt will also increase, from 1 % to 3% of sales. The variable cost for each product is USD 12.5. Microsoft's opportunity cost on its investment in account receivable is 12.5%. (Assume 1 year: 365 days)

Required:

1. Calculate the minimum price of the product (selling price) that prevents Microsoft from getting a loss!
2. Instead of setting minimum price, Microsoft focuses on the expected increase of the credit sales to get profit. If the price of the product is USD 15, how much minimum increase of the credit sales need to be achieved by Microsoft (in percentage)?
3. In the condition that Microsoft sets the product price 16 USD and the expected increase in credit sales by 20%, what is the maximum credit bad debt that Microsoft still can afford for avoiding loss?
4. In your opinion, is credit relaxation a good strategy for current condition (post pandemic Covid-19)? Please elaborate your answer!

Please answer and make calculations referring to the Working Capital and Current Assets Management theory in the book Principles of Managerial Finance by Gitman and Zutter.