Marginal investments in accounts receivable

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Reference no: EM131915291

Pueblo Corp. is considering relaxing its credit standards to encourage more sales. As a result, sales are expected to increase 15 percent from the current level of 300 units per year. The average collection period is expected to increase to 45 days from 25 days and bad debts are expected to double the current 1 percent level. The sale price per unit is $850, the variable cost per unit is $650 and the average cost per unit at the 300 unit level is $700. The firm's required return on investment is 15 percent. What is the cost of marginal investments in accounts receivable under the proposed plan? (assume 365 day year)

Reference no: EM131915291

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