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texasmade2550 texasmade2550
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11 months ago
London Inc. expects to have sales this year of $15 million under its current credit policy. The present terms are net 60; the DSO is 60 days; and the bad debt loss percentage is 5%. Also, London Inc.’s cost of capital is 15%, and its variable costs total 60% of sales. The credit committee proposes to tighten the credit term to net 30. The consultants predict that sales would decrease by $500,000. The new DSO would be 30 days, and the bad debt loss percentage on all sales would fall to 3%. What would be the incremental bad debt losses if the change were made?


▸

$315,000



▸

$260,500



▸

–$260,500 (bad debt losses would decline)



▸

–$315,000 (bad debt losses would decline)

Textbook 
Financial Management: Theory and Practice

Financial Management: Theory and Practice


Edition: 4th
Authors:
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hannahfenghannahfeng
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11 months ago
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texasmade2550 Author
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11 months ago
Good timing, thanks!
taydav
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Yesterday
I appreciate what you did here, answered it right Smiling Face with Open Mouth
MLynneMcMillan
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2 hours ago
This site is awesome
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