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    Evaluating Credit Policy

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    A company is in the process of changing it's credit policy...the policy is currently cash only...the new policy will involve one period's credit...sales are 70,000 units per period at a unit price $530 per unit...if credit is offered the new price will be $552. Unit sales are not expected to change and all customers are expected to take credit...2 % of credit sales will be uncollectible...if the required return is 2 % per period is this change a good idea?

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    Solution Preview

    Incremental Income after the taxes

    1) Increase in Net Income
    Sales*(New price-Old price)= 1540000

    Less ...

    Solution Summary

    The solution looks at evaluating credit policy.