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41) What the cost of marginal investments in accounts receivable

Question : 41) What the cost of marginal investments in accounts receivable : 1415274

 

41) What is the cost of marginal investments in accounts receivable under the proposed plan? (See Table 14.5)

A) $1,817

B) $1,867

C) $1,733

D) $1,617

42) What is the cost of marginal bad debts under the proposed plan? (See Table 14.5)

A) $383

B) $765

C) $3,315

D) $5,100

43) What is the net result of implementing the proposed plan? (See Table 14.5)

A) $3,952

B) $3,869

C) $2,084

D) -$2,084

44) A firm is considering relaxing credit standards, which will result in annual sales increasing from $1.5 million to $1.75 million, the cost of annual sales increasing from $1,000,000 to $1,125,000, and the average collection period increasing from 40 to 55 days. The bad debt loss is expected to increase from 1 percent of sales to 1.5 percent of sales. The firm's required return on investments is 20 percent. The firm's cost of marginal investment in accounts receivable is ________. (Assume a 360-day year.)

A) $5,556

B) $9,944

C) $12,153

D) $152,778

45) A firm is considering relaxing credit standards which will result in an increase in annual sales from $3 million to $3.75 million, a decrease in the cost of annual sales from $2,225,000 to $2,000,000, an increase in additional profit contribution from sales of $10,000, and an increase in the average collection period of 15 days, from 20 to 35 days. The bad debt loss is expected to increase from 1 percent to 1.5 percent of sales. The firm's required return on investments is 15 percent. The net result of the firm relaxing its credit standards is ________. (Assume a 360-day year.)

A) $10,000

B) -$16,250

C) -$26,875

D) -$16,875

 

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