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A firm sells 120K units of product per year at $20/unit. Variable production cost is $12/unit....

A firm sells 120K units of product per year at $20/unit. Variable production cost is $12/unit. The firm considers relaxing credit standards and estimates that sales would increase by 5%, the ACP from 30 to 45 days and bad debt expense from 1% to 2% of sales. It costs 12% per year to finance the CCC. Is this a good idea? Assume a commercial year and that all sales are on credit.

Answer: Yes. Incremental profit ($48,000) > incremental financial cost ($8,280) + incremental bad debt expense ($26,400)

Can you please explain how we get incremental finance cost as 8280$

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