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Fast Turnstiles Company is evaluating the extension of credit to a new group of customers. Although these customers will provide $$180,000$ in additional credit sales, $12$ percent are likely to be uncollectible. The company will also incur $$16,200$ in additional collection expense. Production and marketing costs represent $72$ percent of sales. The firm is in a $34$ 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 $10$ percent desired return.

a$-1.$ Calculate the incremental income after taxes.

a$-2.$ Calculate the return on incremental investment.

Note: Input your answer as a percent rounded to $2$ decimal places.

a$-3.$ Should Fast Turnstiles Company extend credit to these customers?

multiple choice $1$

Yes Correct

No

b$-1.$ Calculate the incremental income after taxes if $15$ percent of the new sales prove to be uncollectible.

b$-2.$ Calculate the return on incremental investment if $15$ percent of the new sales prove to be uncollectible.

Note: Input your answer as a percent rounded to $2$ decimal places.

b$-3.$ Should credit be extended if $15$ percent of the new sales prove uncollectible?

multiple choice $2$

Yes Correct

No

c$-1.$ Calculate the return on incremental investment if the receivables turnover drops to $1\mathrm{.}6$ and $12$ percent of the accounts are uncollectible.

Note: Input your answer as a percent rounded to $2$ decimal places.

c$-2.$ Should credit be extended if the receivables turnover drops to $1\mathrm{.}6$ and $12$ percent of the accounts are uncollectible?

multiple choice $3$

Yes

No Correct

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