Need answer this accounting question step by step calculation and do fast A firm is considering several policy changes toincrease sales. It will increase the variety of goods itkeeps in inventory, but this will increase inventory by$29,000. It will offer more liberal sales terms, but thiswill result in average receivables increasing by$84,000. These actions are expected to increase salesby $990,000 per year, and the cost of goods willremain at 70% of sales. Because of the firm's increasedpurchases for its own production needs, averagepayables will increase by $54,000.What effect will these changes have on the firm's cashconversion cycle?

Step 1:- Introduction to the Cash Conversion CycleBy its very name, the cash conversion cycle (CCC)…

Answered: A firm is considering several policy…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter12: Corporate Valuation And Financial Planning

Section: Chapter Questions

Problem 2STP

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A firm is considering several policy changes to increase sales. It will increase inventory by $10,000 it will offer more liberal sales terms but will result in average receivables increasing by $65,000. These actions are expected to increase sales by $800,000 per year, and cost of goods will remain at 80% of sales. Because of the firm’s increased purchase of its won production needs, average payable increases by $35,000.What factors should they consider when making these decisions? What effects would they have on the firm’s cash cycle? Please select three financial ratios they should consider and why
A firm is considering several policy changes to increase sales. It will increase the variety of goods it keeps in inventory, but this will increase inventory by $11,500. It will offer more liberal sales terms, but this will result in average receivables increasing by $68,000. These actions are expected to increase sales by $815,000 per year, and cost of goods will remain at 70% of sales. Because of the firm’s increased purchases for its own production needs, average payables will increase by $36,500. What effect will these changes have on the firm’s cash cycle? (Use 365 days in a year. Do not round your intermediate calculations. Round your answer to 2 decimal places.) What is the change in cash cycle? Answer in Excel and show formulas please.
To increase Sales and Sales Growth, the top Marketing Manager suggested to price products slightly lower than the main competitor and at the same time increase product quality (competitor is not expected to react or make changes). This strategy would require an initial one time investment today of $1 million in advertising (and for some machines) and the Net Profit Margin (and Cash Flows) will be zero for years 1, 2, 3. However, sales are expected to grow 20% in years 1,2,3 (then sales will stabilize and sales growth will be 1% in year 4 and over). Also, in year 4 Net Profit Margin will return to 5% (due to economies of scale). (Some numbers have been pre-filled in the tables below). CURRENT BUSINESS SITUATION END OF YEAR 0 1 … Sales Growth 0% … Net Profit Margin 5% … Sales ($Millions) 80.00 … Profit or Cash Flow 4.00 … NPV(i=.15) 26.67 $Millions SUGGESTED SALES…
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?
A firm is considering a new inventory system that will cost $120,000. The system is expected to generate positive cash flows over the next four years in the amounts of $35,000 in year 1, $55,000 in year 2, $65,000 in year 3, and $40,000 in year 4. The firm’s required rate of return is 9%. What is the payback period of this project? 1.95 years 2.46 years 2.99 years 3.10 years Based on the information from Question 47. What is the net present value (NPV) of the project? $28,830.29 $30,929.26 $36,931.43 $39,905.28 Based on the information from Question 47, what is the internal rate of return (IRR) of this project? 14.03% 17.56% 19.26% 21.78% Based on the information from Question 47, what is the profitability index (PI) of this project? 0.87 1.11 1.31 1.83.
The financial manager of Company X has just received the sales forecast for next year and it indicates that the year's sales are expected to double in the second half. What are the challenges that Company X might face in increasing its production to meet the sales projections and how can these challenges be overcome? What risks does Company X face by ramping-up production to meet the sales forecast?
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?
Abercrombie & Fitch, once the favorite of loyal teens, is considering lowering prices on all items it sells in an effort to win them back after several years of sales declines. A&F’s total sales were $4 billion last year, but they have been declining in the face of a weak economy and an intensively competitive retail environment. Price reductions are often effective in increasing sales, but marketers need to analyze how much sales must go up before a price reduction pays off and increases revenue enough to make the it worth doing. By what percentage must costs decrease if A&F wants to maintain the gross margin percentage of 60 percent?
Abercrombie & Fitch, once the favorite of loyal teens, is considering lowering prices on all items it sells in an effort to win them back after several years of sales declines. A&F's total sales were $3 billion last year but they have been declining in the face of a weak economy and an intensively competitive retail environment. Price reductions are often effective in increasing sales, but marketers need to analyze how much sales must go up before a price reduction pays off and increases revenue enough to make the it worth doing. Assuming A&F's gross profit margin is 55 percent and cost of goods sold represents the only variable cost, by how much sales increase to maintain the same gross profit margin in terms of absolute dollars it A&F lowers prices by 10 percent? The current gross profit is $ 1. 65 billion (Round to two decimal places.) Set the initial price equal to $1 00 Then the new price is $9 (Round to the nearest cent) The new gross margin percentage in decimal form equals 55…
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 $ .
TechCorp is considering expanding its operations into a new international market, and the management team has identified two potential countries for expansion: Country A and Country B. Country A has experienced rapid economic growth in recent years, with GDP growing at a rate of 7% annually. However, it faces significant political instability, with frequent government changes and a high risk of new regulations that could impact foreign businesses. Country B, on the other hand, has a slower GDP growth rate of 2% annually but is politically stable with established laws that favor foreign direct investment. TechCorp specializes in manufacturing high-tech consumer electronics, and both countries have a growing middle-class population with increasing demand for such products. In Country A, operational costs, including labor and taxes, are relatively low compared to Country B, but there is a higher risk of supply chain disruptions. Country B offers a more stable business environment with…

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