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    Net Profit for ABC Credit Standards

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    ABC is considering relaxing its credit standards. It expects the proposal will increase sales by 20% from $10 million. The ACP will increase from 35 to 50 days, and bad debts are expected to increase from 2% of sales to 7%. Variable costs are 60% of sales and fixed cost are $2.5 million a year. The opportunity cost is 16%. Assume a 365 day a year. Determine the net profit (loss) of the proposal.

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    Solution Summary

    The solution determines the net profits for ABC credit standards. The credit standards are considered.