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Linda_us, Finance, Accounts & Homework Tutor
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Launch Inc is considering relaxing its credit standards to

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Launch Inc is considering relaxing its credit standards to increase its currently
sagging sales. Sales are expected to increase by 20% from 20,000 to 22,000 units during the
coming year; the average collection period is expected to increase from 45 to 65 days; and
bad debts are expected to increase from 1% to 3% of sales. The sale price per unit is $40,
and the variable cost per unit is $31. The firm’s required return on equal-risk investments is
Evaluate the proposed relaxation, and make a recommendation to the firm. (Note: Assume a
365-day year.)
Thanks for requesting me. I am working on it.

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Wait I made a small mistake I used 60 days instead of 65 days. Give me few minutes I am revising the solution.
Hi Tony

Please click here for revised solution based on 65 days.

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