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Price Corp. is considering selling to a group of new customers and creating new annual sales of $50,000. It is estimated that 5% of these
Price Corp. is considering selling to a group of new customers and creating new annual sales of $50,000. It is estimated that 5% of these new sales will be uncollectible. The collection cost on these accounts is 3.5%, the cost of producing and selling is 80% of sales, and the firm is in the 30% tax bracket. If the only new investment will be an increase in accounts receivable and the company has a receivables turnover of 4, what can Price Corp. expect as an incremental return on investment?
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