Principles of finance

Problem 7-20 Credit policy decision with changing variables (L.07.4) Slow Roll Drum Co is evaluating the extension of credit to a new group of customers. Although these customers will provide $234,000 in additional credit sales, 15 percent are likely to be uncollectible. The company will also incur $16,500 in additional collection expense. Production and marketing costs represent 70 percent of sales. The firm is in a 30 percent tax bracket. No other asset bulldup will be required to service the new customers. The firm has a 10 percent desired return, Assume the average collection period is 180 days . Compute the return on incremental investment (Input your answer as a percent rounded to 2 decimal places. Use . 360-day year.) Return on incremental investment 16,47156