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Mast Quires currently achieves credit revenue of $140,000 per month. Extracts from the accounts are as follows:
The management think that by increasing the period of credit allowed to customers from 1 month to 2 months, revenue will rise by 25%, but bad debts would increase to 5% of revenue. The increase would leave fixed costs, average inventories and average payables unaffected. The company's cost of capital is 15% per annum. The new credit policy would increase annual profits, after additional financing costs, by: The increase in annual profits, after additional financing costs, is: $________ (to the nearest $) |