Calculate the incremental income before taxes

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Question - Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although these customers will provide $180,000 in additional credit sales, 12 percent are likely to be uncollectible. The company will incur $15,700 in additional collection expenses. Production and marketing expenses represent 70 percent of sales. The company has a receivables turnover of five times. No other asset build-up will be required to service the new customers. The firm has a 15 percent desired return on investment.

1. Calculate the incremental income before taxes from this new group of customers.

2. Calculate the return on incremental investment.

3. Should Cominsky extend credit to these customers?

4. Calculate the incremental income before taxes from the new group of customers if 15 percent of the sales prove uncollectable.

Reference no: EM133176361

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