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Expected after tax profits

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Company has the opportunity to increase annual credit sales $100,000 by selling to a new, riskier group of customers. The expenses of collecting credit sales are expected to be 15 percent of credit sales. The company's manufacturing and selling expenses are 70 percent of sales, and its effective tax rate is 40 percent. If Lyman should accept this opportunity, the company's after tax profits would increase by:
$ 9,000.
$10,000.
$10,200.
$14,400.
Some amount other than those given above.

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Solution Summary

This solution contains step-by-step calculations to determine the company's after tax profits.

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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