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Problem 7 . 2 3 Comiskey Fence Co . is evaluating extending credit to a new group of customers. Although these customers will provide $
Problem
Comiskey Fence Co is evaluating extending credit to a new group of customers. Although these customers will provide $ in additional credit sales, percent are likely to be uncollectible. The company will incur $ in additional collection expenses. Production and marketing expenses represent percent of sales. The company has a receivables turnover of five times. No other asset buildup will be required to service the new customers. The firm has a percent desired return on investment.
a Calculate the incremental income before taxes from this new group of customers.
Incremental income before taxes
a Calculate the return on incremental investment. Round the final answer to decimal places.
Return on incremental investment
a Should Cominsky extend credit to these customers?
Yes
No
b Calculate the incremental income before taxes from the new group of customers if percent of the sales prove uncollectable. Incremental income before taxes $
b Calculate the return on incremental investment if percent of the new sales prove uncollectible. Round the final answer to decimal plocess.
Return on incremental investment
b Should credit be extended if percent of the new sales prove uncollectible?
Yes
No
c Calculate the return on incremental investment if the receivables turnover drops to and percent of the accounts are uncollectible as in part aRound the final answer to decimal pleces.
Return on incremental investment
e Should credit be extended if the receivables turnover drops to and percent of the accounts are uncollectible as in part a
Yes
No
Problem
Reconsider Comiskey Fence. Assume the average collection period is days. All other factors are the same including percent uncollectible
a Compute the return on incremental investment. Use deys in a year. Do not round intermediate calculetions. Round the tinal onswer to decimal places.
Return on incremental investment
b Should credit be extended?
Yes
No
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