Determining the net profit

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Reference no: EM1378385

Corporation XYZ is going to relax its credit standards. The proposal will increase sales by 20 percent from ten million. The average collection period is expected to raise from 35 to fifty days and bad debts are expected to increase from 2 percent of sales to 7 percent. The firms variable cost =60% of sales and fixed cost total 2.5 million per year. The opportunity cost is 16%. Assume a 365 day year. Determine net profit(cost) of the proposed relaxation of credit standard.

Reference no: EM1378385

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