Example of Relaxing the credit period New ($2,000,000 sales)/(6 Turns)= receivable level $333,333 nvestment in $333,333-$166,667= add receivables $166,666 (original sales) Total investment in $33,334+$166,666 add receivables $200,000 Reg. pre-tax return (20% opp cost) x $200,000 on add. investment 40.000 10-14 Yes! Profits> Required pre-tax return10-14 Example of Relaxing the Credit Period New ($2,000,000 sales) / (6 Turns) = receivable level $333,333 Investment in $333,333 - $166,667 = add. receivables $166,666 (original sales) Total investment in $33,334 + $166,666 = add. receivables $200,000 Req. pre-tax return (20% opp. cost) x $200,000 = on add. investment $40,000 Yes! Profits > Required pre-tax return