Norton Wrench, a machine-tool company,recently found out that one of its main competitors has tightened its creditstandards.Norton'schief 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 costaccountants.Expensesrelated 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 DSOof 56days is not expected to change.The company's annual cost of capital is 15%.Calculate the new standard's 1daychange 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