Relaxation of credit standards Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 10% from 15,000 to 16,500 units during the coming year, the average collection period is expected to increase from 30 to 45 days, and bad debts are expected to increase from 2% to 3.5% of sales. The sale price per unit is $43, and the variable cost per unit is $32. The firm's required return on equal-risk investments is 10.9%. Evaluate the proposed relaxation, and make a recommendation to the firm. (Note: Assume a 365-day year.) The additional profit contribution from an increase in sales is $ (Round to the nearest dollar.) The cost from the increased marginal investment in A/R is $ (Round to the nearest dollar.) The cost from the increase in bad debts is $ (Round to the nearest dollar.) The net profit or loss from implementing the proposed plan is $ (Round to the nearest dollar. Enter a negative number for a loss.) Is the proposed plan recommended? (Select from the drop-down menu.) Yes No Relaxation of credit standards Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 10% from 15,000 to 16,500 units during the coming year, the average collection period is expected to increase from 30 to 45 days, and bad debts are expected to increase from 2% to 3.5% of sales. The sale price per unit is $43, and the variable cost per unit is $32. The firm's required return on equal-risk investments is 10.9%. Evaluate the proposed relaxation, and make a recommendation to the firm. (Note: Assume a 365-day year.) The additional profit contribution from an increase in sales is $ (Round to the nearest dollar.) The cost from the increased marginal investment in A/R is $ (Round to the nearest dollar.) The cost from the increase in bad debts is $ (Round to the nearest dollar.) The net profit or loss from implementing the proposed plan is $ (Round to the nearest dollar. Enter a negative number for a loss.) Is the proposed plan recommended? (Select from the drop-down menu.) Yes No