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 20% from 11,000 to 13,200 units during the coming year; the average collection period is expected to increase from 30 to 50 days; and bad debts are expected to increase from 3% to 5% of sales. The sale price per unit is $39, and the variable cost per unit is $29. The firm's required return on equal-risk investments is 10.8%. Evaluate the proposed relaxation, and make a recommendation to the firm. (Note: Assume a 365-day year.)

a. The additional profit contribution from an increase in sales is $?. (Round to the nearest dollar.)

b.

c.

d.

e.