Note: Round calculations to the seventh decimal place when calculating daily interest rates. Use the simple interest rate unless otherwise specified. 1. 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 present level of $275,000. The variable cost ratio is 0.7 and will not change, according to one of the cost accountants. Variable 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 on both existing and incremental (lost) sales is estimated to be 7%. The DSO of 56 days is not expected to change and can be applied to any sales gained or lost due to a change in credit standards The company's annual cost of capital is 15%. Draw a cash flow timeline for 1 day's sales under the proposed standards. a. What is the value effect (AZ) of this decision on 1 day's sales? b. What is the overall value effect (ANPV)? c. Are there any nonfinancial considerations about which you believe the executive policy committee should be warned? Note: Round calculations to the seventh decimal place when calculating daily interest rates. Use the simple interest rate unless otherwise specified. 1. 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 present level of $275,000. The variable cost ratio is 0.7 and will not change, according to one of the cost accountants. Variable 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 on both existing and incremental (lost) sales is estimated to be 7%. The DSO of 56 days is not expected to change and can be applied to any sales gained or lost due to a change in credit standards The company's annual cost of capital is 15%. Draw a cash flow timeline for 1 day's sales under the proposed standards. a. What is the value effect (AZ) of this decision on 1 day's sales? b. What is the overall value effect (ANPV)? c. Are there any nonfinancial considerations about which you believe the executive policy committee should be warned