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Slow Roll Drum Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide $414,000 in additional credit
Slow Roll Drum Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide $414,000 in additional credit sales, 8 percent are likely to be uncollectible. The company will also incur $17,400 in additional collection expense. Production and marketing costs represent 76 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 desired retum of 10 percent. Assume the average collection pericd is 60 days. a. Compute the return on incrementall investment. (Input your answer as a percent rounded to 2 decimal places. Use a 360-day year.) Retum on incremental investment
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