Norton Wrench, a machine-tool company, recently found out that one of its main competitors has tightened its credit standards. Norton's chief operating officer has asked you to make a recommendation to the executive policy committee on whether the company should tighten its standards. The marketing department estimates that annual sales will drop $20,000 from the current level of $275,000. The variable cost ratio is 0.7 and will not change, according to the cost accountants. Expenses related to collections and credit administration are projected at 1.25% of sales under the existing standards but 1.45% of sales under the proposed standards. The bad debt expense rate remain at 7%. The DSO of 56 days is not expected to change. The company's annual cost of capital is 15%. Calculate the new standard's 1 day change in value.

	a.	- $12.15
	b.	$12.15
	c.	$1000.00
	d.	$136.17

Using the scenario presented in the previous questions, calculate the overall value effect of the change to the new credit standards.

	a.	$12.15
	b.	- $29,571.27
	c.	$295,000.00
	d.	$2,950,000