A firm is considering relaxing its credit standards which will result in annual sales increasing from $1.50 million to $2.09 million. Costs of goods sold represent 77 percent of sales and the average collection period is expected to increase from 39 to 51 days. If the firm requires a return of 13.8 percent, what the cost of investing in the extra accounts receivables from the planned relaxation of credit standards? Please show workings.
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