Don't use ai given answer accounting questions A firm is considering several policy changes to increase sales. It willincrease the variety of gods it keeps in inventory, but this will increaseinventory by $25,000. It will offer more liberal sales terms, but this willresult in average receivables increasing to $80,000. These actions areexpected to increase sales to $950,000 per year, and cost of goodswill remain at 70% of sales. Because of the firm's increased purchasesfor its own production needs, average payables will increase to$50,000. What effect will these changes have on the firm's cashconversion cycle? (use 365 days in year)

Step 1: Define Cash Conversion CycleThe cash conversion cycle measures the duration required by any…

Answered: A firm is considering several policy…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 12P

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Sunny Manufacturing is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $220,000 if credit is extended to these new customers. Of the new accounts receivable generated, 10 percent will prove to be uncollectible. Additional collection costs will be 5 percent of sales, and production and selling costs will be 70 percent of sales. a. Compute the incremental income before taxes. $ Incremental income before taxes b. What will the firm's incremental return on sales be if these new credit customers are accepted? (Round the final answer to 2 decimal place.) Incremental return on sales % c. If the receivable turnover ratio is 4 to 1, and no other asset buildup is needed to serve the new customers, what will Sunny Manufacturing's incremental return on new average investment be? (Do round intermediate calculations. Round the final answer to the nearest whole percentage.) Incremental return on new average investment %
A company with annual sales of $22,000,000 is considering changing its payment terms from net 40 to net 30 to encourage customers to pay more promptly. The company forecasts that customers would respond by paying on day 32 rather than day 44 as at present (assume a 360 day year) but would decrease their purchases by $400,000 per year. The company also forecasts that its idle cash balance would decrease by $80,000 and administrative costs would be reduced by $30,000 per year. The company's variable costs average 62% of sales, it is in the 35% marginal tax bracket, and it has an 8% cost of capital. Part A: Calculate the incremental cash flows from accepting this proposal, and organize your cash flows into a cash flow spreadsheet. Part B: Calculate the proposal's NPV, IRR, and NAB. Part C: Should the company shorten its payment terms?
A company with annual sales of $22,000,000 is considering changing its payment terms from net 40 to net 30 to encourage customers to pay more promptly. The company forecasts that customers would respond by paying on day 32 rather than day 44 as at present (assume a 360 day year) but would decrease their purchases by $400,000 per year. The company also forecasts that its idle cash balance would decrease by $80,000 and administrative costs would be reduced by $30,000 per year. The company's variable costs average 62% of sales, it is in the 35% marginal tax bracket, and it has an 8% cost of capital. Part A: Calculate the incremental cash flows from accepting this proposal, and organize your cash flows from part A into a cash flow spreadsheet. Part B: Calculate the proposal's NPV, IRR, and NAB. Part C: Should the company shorten its payment terms?
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $270,000 if credit is extended to these new customers. Of the new accounts receivable generated, 9 percent will prove to be uncollectible. Additional collection costs will be 6 percent of sales, and production and selling costs will be 75 percent of sales. 1. Compute the incremental income before taxes. 2. What will the firm’s incremental return on sales be if these new credit customers are accepted? (Round final answer to 2 decimals) 3. If the receivable turnover ratio is 5 to 1, and no other asset buildup is needed to serve the new customers, what will Johnson Electronics’ incremental return on new average investment be? (Round only the final answer to %)
If the Rhine Company ignores the possibility that other firms may enter its market, it should set a price of $10,000 for its product, which is a power tool. But if it does so, other firms will begin to enter the market. During the next two years it will earn $4 million per year, but in the following two years it will earn $1 million per year. On the other hand, if it sets a price of $7,000, it will earn $2.5 million in each of the next four years because no entrants will appear. Try various discount (interest) rates and draw a conclusion about the timing of profits
If the Rhine Company ignores the possibility that other firms may enter its market, it should set a price of $10,000 for its product, which is a power tool. But if it does so, other firms will begin to enter the market. During the next two years it will earn $4 million per year, but in the following two years it will earn $1 million per year. On the other hand, if it sets a price of $7,000, it will earn $2.5 million in each of the next four years because no entrants will appear. If the interest rate is 10 percent, should the Rhine Company set a price of $7,000 or $10,000? a. NPV $8.4M for $10,000 price b. NPV $10.0M for $10,000 price c. NPV $7.9M for $7,000 price d. NPV $10.0M for $7,000 price
Finally, assume that the new product line isexpected to decrease sales of the firm’s otherlines by $50,000 per year. Should this be considered in the analysis? If so, how?
Can you please solve this accounting question ?
Grady-White Boats, Inc. is considering a project that will require additional inventory of $1,131,000. In addition, pursuing this project will also increase accounts payable by $400,000 as suppliers are willing to finance part of these purchases. Accounts receivable are currently $800,000 and are expected to increase by 10% if this project is accepted. The firm's cash requirements are not anticipated to change. What is the incremental change to net working capital as a result of accepting this project? O A. $1,531,000 O B. $1,451,000 C. $811,000 D. $651,000 O E. $1,611,000
High Inc. has annual sales of P40,000,000 and keeps average inventory of P10,000,000. On average, the firm has accounts receivable of P8,000,000. The firm buys all raw materials on credit, its trade credit terms are net 30 days, and it pays on time. The firm’s managers are searching for ways to shorten the cash conversion cycle. If sales can be maintained at existing levels but inventory can be lowered by P2,000,000 and accounts receivable lowered by P1,000,000, what will be the net change in the cash conversion cycle (in days)? Use a 360-day year. No rounding-off throughout the process.
To increase sales, management is considering reducing its credit standards. This action is expected to increase sales by $120,000. Unfortunately, it is anticipated that 7 percent of the sales will be uncollectible. Accounts receivable turnover is expected to be seven times a year, and it costs the firm 11 percent to carry its receivables. Collection costs will be 4 percent of sales, and the cost of the additional goods sold is $62,000. Will earnings increase? Round your answer to the nearest dollar. Net in earnings is $ .
XYZ Stadium Inc. has annual sales of P80,000,000 and keeps average inventory of P20,000,000. On average, the firm has accounts receivable of P16 ,000,000. The firm buys all raw materials on credit, its trade credit terms are net 35 days, and it pays on time. The firm’s managers are searching for ways to shorten the cash conversion cycle. If sales can be maintained at existing levels but inventory can be lowered by P4,000,000 and accounts receivable lowered by P2,000,000, what will be the net change in the cash conversion cycle? Use a 365-day year. Round to the closest whole day. A firm has an average age of inventory of 60 days, an average collection period of 45 days, and an average payment period of 30 days. The firm’s cash conversion cycle is A firm has a cash conversion cycle of 120 days, an average collection period of 25 days, and an average payment period of 50 days. The firm’s average age of inventory is A firm purchased raw materials on account and paid for them within…

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