ABC is considering relaxing its credit standards. It expects
the proposal will increase sales by 20% from $10 million. The ACP will increase
from 35 to 50 days, and bad debts are expected to increase from 2% of sales to
Variable costs are 60% of sales and fixed cost are $2.5
million a year. The opportunity cost is 16%. Assume a 365 day a year. Determine
the net profit (loss) of the proposal.