Can you please solve this accounting question ? Johnson Electronics is considering extending trade credit to somecustomers previously considered poor risks. Sales would increaseby $100,000 if credit is extended to these customers. Of the newaccounts receivable generated, 10 percent will prove to beuncollectible. Additional collection costs will be 3 percent of sales,and production and selling costs will be 79% of sales.a. Compute the incremental income before taxes.b. What will be the firm's incremental return on sales be if these newcredit customers are accepted? (Round answer to 1 decimal place.)c. If the receivable turnover ratio is 6 to 1, and no other asset buildupis needed to serve the new customers, what will JohnsonElectronics' incremental return on new average investment be?(Round answer to the nearest whole percentage.)

Step 1: Define SalesSales refers to the act of providing goods and services to an individual or…

Answered: Johnson Electronics is considering…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 10P

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The Sandbox's Company has cash needs of P5 million per month. If Sandbox needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If Sandbox leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. 1. Using the Baumol model, how much would be the Sandbox’s minimum total costs associated with cash infusion? 2. If Sandbox gets a cash infusion of P1 million each time it needs cash, what are the holding costs associated with its cash investment? 3. Using the Baumol model, what level of cash infusion minimizes Sandbox’s costs associated with cash?
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?
Your boss has just presented you with the summary in the accompanying table of projected costs and annual receipts for a new product line. He asks you to calculate the IRR for this investment opportunity. What would you present to your boss, and how would you explain the results of your analysis? (It is widely known that the boss likes to see graphs of PW versus interest rate for this type of problem.) The company’s MARR is 10% per year.
You are considering an investment in a clothes distributer. The company needs $105,000 today and expects to repay you $120,000 in a year from now. What is the IRR of this investment opportunity? Given the riskiness of the investment opportunity, your cost of capital is 17%. What does the IRR rule say about whether you should invest? What is the IRR of this investment oppurtunity? The IRR of this investment opppurtunity is ____%
The owner of Ardent company wants to increase sales by ZMW75 000 over the next year. The company's gross profit margin is 30 percent of sales, so its gross profit on these additional sales would be ZMW X 30%=ZMW 22 500, its average collection period is 47 days, and managers estimate that generating the additional sales will require an increase in expenses of ZMW 21 300 a) What the additional cash that Ardent will need to support this higher level of sales? b) What steps can the owner use to reduce the cash cycle? c) What is the implication on your business if you run out of cash?
Portland Savings and Loan is considering new computersoftware, which, because of installation and training cost,will have an unusual pattern of net receipts. The expected receiptsare: $20,000 in year 1, nothing in the next yea r, $30,000 in year 3,and $50,000 in year 4. At an interest rate of 6% what is the presentvalue of these receipts?
Your business partner has just presented to you a summary of projected costs and annual receipts for a new product line. He asks you to calculate the before-tax IRR & ERR for the investment opportunity. The company’s MARR = 15% quarterly. Is this investment justified?
ABC Inc is considering a project that will generate perpetual cash flows of $15,000 per year beginning next year. The project has the same risk as the firm's overall operations and must be financed externally. Equity costs 14% and debt costs 4% on an after-tax basis. The firm's D/E ratio is 0.8. What is the most ABC Inc can pay for the project and still earn its required return? (Note that the choices are rounded to thousands) Select one: a. $138,000 b. $157,000 c. $164,000 ○ d. $182,000 e. $199,000
You are considering an investment in a clothes distributer. The company needs $106,000 today and expects to repay you $124,000 in a year from now. What is the IRR of this investment opportunity? Given the riskiness of the investment opportunity, your cost of capital is 15%. What does the IRR rule say about whether you should invest? What is the IRR of this investment opportunity? The IRR of this investment opportunity is %. (Round to two decimal places.)
(Ignore income taxes in this problem.) Your Company is considering an investment proposal in which a working capital investment of $45,000 would be required. The investment would provide cash inflows of $5,000 per year for seven years. The company's discount rate is 8%. What is the investment's net present value? a- $4,115 b- $3,530 c- $7,265 d- $5,645
(Ignore income taxes in this problem.) Your Company is considering an investment in a project that will have a three-year life. The project will provide a 4% internal rate of return and is expected to have a $40,000 cash inflow the first year and a $0 cash inflow in the second year, and $50,000 cash inflow in the third year. What investment is required in the project?
JTG Instruments is considering an investment of $500,000 in a new product line. The company will make the investment only if it will result in a rate of return of 15% per year or higher. If the revenue is expected to be between $135,000 and $165,000per year for 5 years, determine if the decision to invest is sensitive to the projected range of income using a present worth analysis

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