Credit Policy. Wilder Corporation is considering granting credit to currently limited customers or no-credit customers. The following information is given:
Category Bad Debt Percentage Collection Period Credit Terms Incremental Annual Sales Accompanying Relaxation in Credit Standards ($)
A 3 20 days Full 250,000
B 6 45 days Restricted 540,000
C 10 90 days No credit 800,000
Gross profit approximates 12 percent of sales. The rate of return is 18 percent. Should credit be extended to categories B and C?
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