Wyatt Inc. is evaluating the proposal to lengthen its credit period from 20 to 40 days. All customers will continue to pay on the net date. Currently, credit sales are $500,000, while variable costs are $375,000. The selling price is $50 per unit. The proposal is expected to increase its credit sales by 20%. However, bad debts are expected to increase from 1% to 3% of the sales. The required rate of return on equal risk investment is 15%. (Assume a 360-day year).

1. Compute the additional profit contribution margin from sales if the proposal is implemented. 2. Compute the cost of marginal investment in accounts receivable. 3. Calculate the cost of marginal bad debts. 3. From your perspective, should the proposal be implemented by the company?