(Solved): Fast Turnstiles Co. is evaluating the extension of credit to a new group of customers. Although the ...

Fast Turnstiles Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide \( \$ 450,000 \) In additional credit sales, 10 percent are likely to be uncollectible. The company will also incur \( \$ 17,600 \) in additional collection expense. Production and marketing costs represent 78 percent of sales. The firm is in a 25 percent tax bracket and has a recelvables turnover of flve times. No other asset bulldup will be required to service the new customers. The firm has a 8 percent desired retum. a-1. Calculate the incremental income after taxes. a-2. Caiculate the return on incremental investment. (Input your answer as a percent rounded to 2 decimal places.) a-3. Should Fast Turnstiles Co. extend credit to these customers? Yes No b-1. Calculate the incremental income after taxes if 13 percent of the new sales prove to be uncollectible. b.2. Calculate the return on incremental investment if 13 percent of the new sales prove to be uncollectible. (Input your answer as a percent rounded to 2 decimal places.) b-3. Should credit be extended if 13 percent of the new sales prove uncollectible? Yes No c-1. Calculate the return on incremental investment if the receivables turnover drops to \( 1.6 \) and 10 percent of the accounts are uncollectible. (Input your answer as a percent rounded to 2 decimal places.) c-2. Should credit be extended if the recelvables turnover drops to \( 1.6 \) and 10 percent of the accounts are uncollectible? No Yes