Evaluate forrester proposed relaxation of credit standards

Reference no: EM13290050

Forrester Fashions has annual credit sales of 250,000 units with an average collection period of 70 days. The company has a per-unit variable cost of $20 and a per- unit sale price of $30. Bad debts currently are 5% of sales. The firm estimates that aproposed relaxation of credit standards would not affect its 70-day average collection period but would increase bad debts to 7.5% of sales, which would increase to 300,000 units per year. Forrester requires a 12% return on investments. Show all necessary calculations required to evaluate Forrester's proposed relaxation of credit standards.

Reference no: EM13290050

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