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Soman Company has the opportunity to increase annual revenues $100,000 by selling to a new, riskier group of customers.The bad debt expense is expected to
Soman Company has the opportunity to increase annual revenues $100,000 by selling to a new, riskier group of customers.The bad debt expense is expected to be 15% of revenues (on theseadditional sales only) and collection costs will be 5% of revenues (on these additional sales only).The companys manufacturing and selling expenses are 70% of revenues on all sales and its effective tax rate is 40%.If Soman should accept this opportunity, the company will increase its after-tax profits by
A.$10,000
B.$9,000
C.$6,000
D.$18,000
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