Evaluate proposed relaxation-make recommendation to firm

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Reference no: EM131606214

Relaxation of credit standards Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of he proposed relaxation, sales are expected to increase by 20% from 14,000 to 16, 800 units during the coming year, the average collection period is expected to increase from 35 to 55days, and bad debts are expected to increase from 2% to 4% of sales. The sales price per unit is $35, and the variable cost per unit is $23. The firm's required return on equal-risk investments is 25.2%.

Evaluate the proposed relaxation, and make a recommendation to the firm. The additional profit contribution from an increase in sales is $. (Round to the nearest dollar.)

Reference no: EM131606214

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