Emma International Is Considering Easing Credit Standards to Increase Sales,and

question 84

Multiple Choice

Emma International is considering easing credit standards to increase sales,and potentially profits.Currently the firm sells 500,000 units at a sales price of $22 per unit and variable cost of $13 per unit.Currently the average collection period is 25 days and the bad debt expense is 2% of sales.The required return on investment is 12%.If credit standards are eased,the sales will increase to 600,000 units; the ACP will increase to 35 days; and the bad debt expense will increase to 3% All else will remain the same.What is the profit (or loss) associated with easing credit standards?

• A) $724,000.00
• B) $511,671.23
• C) $212,328.77
• D) $687,671.23

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