Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $170,000 if credit were extended to these new customers. Of the new accounts receivable generated, 5 percent will prove to be uncollectible. Additional collection costs will be 4 percent of sales, and production and selling costs will be 76 percent of sales. The firm is in the 15 percent tax bracket. a. Compute the incremental income after taxes.

You are in the market for a new refrigerator for your company’s lounge, and you have narrowed the search down to two models. the energy efficient model sells for $700 and will save you $45 at the end of each of the next five years in electricity costs. the standard model has features similar to the energy efficient model but provides no future saving in electricity costs. it is priced at only $500. assuming your opportunity cost of funds is 6 percent, which refrigerator should you purchase