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CoursHeroTranscribedText: To increase sales from their present annual $10 million, Nike Company, may try more...

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Accounting

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CoursHeroTranscribedText: To increase sales from their present annual $10 million, Nike Company, may try more liberal credit standards. Currently, the rm has an average collection period of 45 days. It believes that, with increasingly liberal credit standardsI the following will result: CREDIT PDLl CIES --m Increase in Sales from previous $1.75 l.25 (1.75 ll.5[l level [ in million} Average collection period for TS 1211] l increment sales (days) The prices of its products average $50 per unit, and variable costs average 545 per unit. No baddebt losses are expected. If the company has a pretax opportunity cost of Funds of 35 percent, which credit policy should he pursued? Why? {Assume a Soilday year.)

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