Problem $7-23$

Comiskey Fence Co$.$ is evaluating extending credit to a new group of customers. Although these customers will provide $$270,000$ in additional credit sales, $9$ percent are likely to be uncollectible. The company will incur $$16,700$ in additional collection expenses. Production and marketing expenses represent $75$ percent of sales. The company has a receivables turnover of four times. No other asset buildup will be required to service the new customers. The firm has a $19$ percent desired return on investment.

a$-1.$ Calculate the incremental income before taxes from this new group of customers.

Incremental income before taxes

$

a$-2.$ Calculate the return on incremental investment. $($Round the final answer to $2$ decimal place.$)$

Return on incremental investment $\%$

a$-3.$ Should Cominsky extend credit to these customers?

Yes

No

b$-1.$ Calculate the incremental income before taxes from the new group of customers if $12$ percent of the sales prove uncollectable.

Incremental income before taxes $

b$-2.$ Calculate the return on incremental investment if $12$ percent of the new sales prove uncollectible. $($Round the final answer to $2$ decimal place.$)$

Return on incremental investment

$\%$