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

question 55

Multiple Choice

Roxy International is considering easing credit standards to increase sales,and potentially profits.Currently the firm sells 2,000,000 units at a sales price of $7 per unit and variable cost of $5 per unit.Currently the average collection period is 35 days and the bad debt expense is 2% of sales.The required return on investment is 18%.If credit standards are eased,the sales will increase to 2,500,000 units; the ACP will increase to 65 days; and the bad debt expense will increase to 5% All else will remain the same.What is the marginal profit from increased sales?

• A) $ 3,500,000.00
• B) $ 1,000,000.00
• C) $ 2,500,000.00
• D) $14,000,000.00

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