Spector \& Co. Is considering a more liberal credit policy to increase sales, but it expects that 8 percent of the new accounts will be uncollectible. Collection costs are 2 percent of new sales, production costs are 74 percent of sales, and accounts recelvable turnove is two times. Assume an increase in sales of $76,000. No other asset bulldup will be required to service the new accounts. a. What is the level of investment in accounts recelvable to support this sales expansion? Investment in occounts recelvable b. What would be Spector & Co.s incremental before-tax return on investment? Return on incremental investment c. Should Spector & Co. liberalize credit if a 25 percent before-tax retum is required (opportunity cost of capitali)? Yes No Assume Spector \& Co. also needs to increase its level of inventory to support new sales and that inventory tumover is four times on Cost of Goods Sold. d. What would be the total incremental investment in accounts receivable and inventory to support a $76,000 increase in sales? Total incremental investment e. Given the income determined in part b and the investment determined in part d, should Spector & Co extend more liberal credit terms? Yes No