Account receivables using decision making

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Collins Office Supplies is considering a more liberal credit policy to increase sales, but expects that 9 percent of the new accounts will be uncollectible. Collection costs are 5 percent of new sales, production and selling costs are 78 percent, and accounts receivable turnover is five times. Assume income taxes of 30 percent and an increase in sales of $80,000. No other asset build-up will be required to service the new accounts.

What would be Collins's incremental after tax return on investment?

Reference no: EM1317390

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