Business, 03.04.2020 22:10 Renarock

Shortening the credit period A firm is contemplating shortening its credit period from 45 to 35 days and believes that, as a result of this change, its average collection period will decline from 49 to 42 days. Bad-debt expenses are expected to decrease from 1.5 % to 0.9 % of sales. The firm is currently selling 12 comma 400 units but believes that as a result of the proposed change, sales will decline to 10 comma 300 units. The sale price per unit is $ 57, and the variable cost per unit is $ 47. The firm has a required return on equal-risk investments of 11.9 %. Evaluate this decision, and make a recommendation to the firm. (Note: Assume a 365-day year.) The reduction in profit contribution from a decline in sales is $ nothing. (Round to the nearest dollar. Enter as a negative number.)

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Shortening the credit period A firm is contemplating shortening its credit period from 45 to 35 days...

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