Problem 7-20 (Algo) Credit policy decision with changing variables [LO7-4] Slow Roll Drum Company is evaluating the extension of 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 also incur $16,700 in additional collection expense. Production and marketing costs represent 75 percent of sales. The firm is in a 35 percent tax bracket. No other asset buildup will be required to service the new customers. The firm has a 8 percent desired return. Assume the average collection period is 90 days. a. Compute the return on incremental investment. Note: Input your answer as a percent rounded to 2 decimal places. Use a 360-day year. b. Should credit be extended to the new group of customers? Yes No