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Problem 7-20(Algo) Credit policy decision with changing variables [LO7-4] Slow Roll Drum Company...

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Accounting

Problem 7-20(Algo) Credit policy decision with changing variables [LO7-4]
Slow Roll Drum Company is evaluating the extension of credit to a new group of customers. Although these customers will provide $432,000 in additional credit sales, 9 percent are likely to be uncollectible. The company will also incur $17,500 in additional collection expense. Production and marketing costs represent 77 percent of sales. The firm is in a 35 percent tax bracket. No other asset buildup will be required to service the new customers. The firm has a 12 percent desired return. Assume the average collection period is 180 days.
a. Compute the return on incremental investment.
Note: Input your answer as a percent rounded to 2 decimal places. Use a 360-day year.
Return on incremental investment
%
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