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Please provide step by step solution. C) Krug Gold Coin, Inc. is considering shortening its credit period from 30 days to 20 days and believes
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C) Krug Gold Coin, Inc. is considering shortening its credit period from 30 days to 20 days and believes as a result of this change, its average collection period will decrease from 36 days to 30 days. Bad debt expenses are also expected to decrease from 1.2% to 0.8% of sales. The firm is currently selling 300,000 units but believes as a result of the change, sales will decline to 275,000 units. On 300,000 units, sales revenue is $4,200,000, variable costs total $3,300,000 and fixed costs are $300,000. The firm has a required return on similar risk investments of 15%. Evaluate this proposed change and make a recommendation to Krug Gold CoinStep by Step Solution
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