What change in policy would result to incremental investment

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Problem 1: SMS Co. has sales of P3 million. Its credit period and average collection period are both 30 days and 1% of its sales end up as bad debts. The general manager intends to extend the credit period of 45 days which will increase sales by P300,000. However, bad debts losses on the incremental sales would be 3%. Costs of products and related expenses amount to 40% exclusive of the cost of carrying receivables of 15% and bad debts expenses. Assuming 360 days a year, the change in policy would result to incremental investments in receivables of

Option 1: P24,704

Option 2: P65,000

Option 3: P162,500

Option 4: P701,573

Reference no: EM132952700

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