Solution-Evaluate the proposed relaxation, and make a

Evaluate the proposed relaxation, and make a recommendation

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Reference no: EM131109355

Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 10% from 10,000 to 11,000 units during the coming year; the average collection period is expected to increase from 45 to 60 days; and bad debts are expected to increase from 1% to 3% of sales. The sale price per unit is $40, and the variable cost per unit is $31. The firm's required return on equal-risk investments is 25%.

Evaluate the proposed relaxation, and make a recommendation to the firm.

Reference no: EM131109355

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Evaluate the proposed relaxation, and make a recommendation

Reference no: EM131109355

Reference no: EM131109355

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