What is the expected amount of additional profit

Reference no: EM133609840

Question: Jaxx Canoes is considering relaxing its credit standards to encourage more sales. As a result, the company expects sales to increase 15% from 300 canoes per year to 345 canoes per year. The selling price is $850 per canoe and the variable costs are $650 per canoe The company expects its average collection period will increase from 30 days to 40 days. It estimates that its bad debts will double from its the current level of 1% of sales. Jaxx Canoes has a required return on investments of similar risk of 15%. What is the expected amount of additional profit from sales under the proposed relaxation of credit standards by Jaxx Canoes?

Reference no: EM133609840

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