Problem:
William electronics has decided to extend trade credit to some customers previously considered poor risks. Sales would increase by $200,000 if credit is extended to these new customers. However, 10% of these new accounts will be uncollectable. The cost of producing and selling the product will be 80 percent of the sales. The firm is in the 40 percent tax bracket.
Required:
Question: What is the incremental income after tax associated with extra sales?
Note: Provide support for rationale.