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Corporate Finance
  • From Business, Finance
  • Due on 05 Jun, 2017 12:00:00
  • Asked On 03 Jun, 2017 11:13:43
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Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks.   Sales are projected to increase by $150,000 per year if credit is extended to these new customers.  Of the new accounts receivable generated, 9% are projected to be uncollectible.  Additional collection costs are projected to be 3% of incremental sales (whether they actually end up collected or not), and production and selling costs are projected to be 77% of sales.  Your firm expects to pay a total of 40% of its income after expenses in taxes.

 

1)     Compute the incremental income after taxes that would result from these projections:

 

2)     Compute the incremental Return on Sales if these new credit customers are accepted:

 

If the receivable turnover ratio is expected to be 2.5 to 1 and no other asset buildup is needed to serve the new customers…

3)     Compute the  additional investment in Accounts Receivable

4)     Compute the incremental Return on New  Investment

 

5)     If your company requires a 18% Rate of Return on Investment for all proposals, do the numbers suggest that trade credit should be extended to these new customers?  Explain.

 

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Corporate Finance A+
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  • Submitted On 03 Jun, 2017 05:48:43
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You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company. Each proposal is independent of the other. Answer all questions. Showing yo...
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Proposal #1 and 2
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  • Submitted On 03 Jun, 2017 05:59:33
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You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company. Each proposal is independent of the other. Answer all questions. Showing your work may earn you partial credit. Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks. Sales are projected to increase by $150,000 per year if credit is extended to these new customers. Of the new accounts receivable generated, 9% are projected to be uncollectible. Additional collection costs are projected to be 3% of incremental sales, and production and selling costs are projected to be 77% of sales. Your firm expects to pay a total of 40% ...
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COMPLETE AND DETAILED SOLUTION
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  • Submitted On 04 Jun, 2017 02:26:20
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BUSI 320 Comprehensive Problem 2Spring D 2017 ...
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Corporate Finance (Proposal 1 and 2)
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  • Submitted On 05 Jun, 2017 06:30:34
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Please see att...
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