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Problem 7-23 Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although these customers will provide $180,000 in additional credit sales,
Problem 7-23 Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although these customers will provide $180,000 in additional credit sales, 12 percent are likely to be uncollectible. The company will incur $16.200 in additional collection expenses Production and marketing expenses represent 72 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 20 percent desired return on investment. 0-1. 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 2-3. Should Cominsky extend credit to these customers? Yes O No b-1. Calculate the incremental income before taxes from the new group of customers if 15 percent of the sales prove uncollectable Incremental income before taxes
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