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Relaxation of credit standards
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 13,000 to 14,300 units during the coming? year; the average collection period is expected to increase from 45 to 65 days; and bad debts are expected to increase from 11?% to 33?% of sales. The sale price per unit is $40?, and the variable cost per unit is $31. The? firm's required return on? equal-risk investments is 25.3?%. Evaluate the proposed? relaxation, and make a recommendation to the firm. ?(?Note: Assume a? 365-day year.)
The additional profit contribution from an increase in sales is ?$__________
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