Wednesday
November 26, 2014

Homework Help: fiance

Posted by nikkitt on Friday, August 14, 2009 at 1:56pm.

Collins Office Supplies is considering a more liberal credit policy to increase
sales, but expects that 9 percent of the new accounts will be uncollectible. Collection
costs are 5 percent of new sales, production and selling costs are 78 percent,
and accounts receivable turnover is five times. Assume income taxes of
30 percent and an increase in sales of $80,000. No other asset buildup will be
required to service the new accounts.
a. What is the level of accounts receivable needed to support this sales
expansion?
b. What would be Collins’s incremental aftertax return on investment?
c. Should Collins liberalize credit if a 15 percent aftertax return on investment
is required?
Assume Collins also needs to increase its level of inventory to support
new sales and that inventory turnover is four times.
d. What would be the total incremental investment in accounts receivable and
inventory to support an $80,000 increase in sales?
e. Given the income determined in part b and the investment determined in
part d, should Collins extend more liberal credit terms?

Answer this Question

First Name:
School Subject:
Answer:

Related Questions

finance - Collins Office Supplies is considering a more liberal credit policy to...
FINANCE - Collins Office Supplies is considering a more liberal credit policy to...
finance - Collins Office Supplies is considering a more liberal credit policy to...
finance - 17. Collins Office Supplies is considering a more liberal credit ...
FIN/200 - Collins Office Supplies is considering a more liberal credit policy to...
Finance - Collins Office Supplies is considering a more liberal credit policy to...
college - Collins Office Supplies is considering a more liberal credit policy to...
fin220 - Collins Office Supplies is considering a more liberal credit policy in ...
FIN 200 - Collins Office Supplies is considering a more liberal credit policy to...
accounting - Uncollectible Accounts—Percentage of Sales Ryan's Express has total...

Search
Members