Fast Turnstiles Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide $324,000 In additional credit sales, 12 percent are likely to be uncollectible. The company will also incur $17,000 In additional collection expense. Production and marketing costs represent 72 percent of sales. The firm is in a 35 percent tax bracket and has a receivables turnover of four times. No other asset buildup will be required to service the new customers. The firm has a 8 percent desired return a-1. Calculate the incremental income after taxes. Incremental income after taxes 3-2. Calculate the return on incremental Investment. (Input your answer as a percent rounded to 2 decimal places.) Return on incremental investment % 8-3. Should Fast Turnstiles Co. extend credit to these customers? Yes No
b-1. Calculate the incremental income after taxes if 15 percent of the new sales prove to be uncollectible. Incremental income after taxes b-2. Calculate the return on incremental investment if 15 percent of the new soles prove to be uncollectible. (Input your answer as a percent rounded to 2 decimal places.) Retum on incremental investment b-3. Should credit be extended if 15 percent of the new sales prove uncollectible? Yes O No c-1. Calculate the return on incremental investment if the receivables turnover drops to 16 and 12 percent of the accounts are uncollectible. (Input your answer as a percent rounded to 2 decimal places.) Return on incremental investment
c-2. Should credit be extended if the receivables turnover drops to 1.6 and 12 percent of the accounts are uncollectible? O No Yes