Do fast answer of this question solution general accounting Mountain Home Systems, Inc. is a well-known and reputablesupplier of integrated circuits to manufacturers oftelecommunications devices. The firm is currently debatingwhether to expand its sales to car-telephone manufacturers.While the firm expects an extra $2 million in sales if it enters thismarket, it also knows that 15% of its sales will ultimately beuncollectible. In addition, collection costs will be 2% on all newsales and the firm's production and selling costs are 80% of sales.Mountain Home's tax rate is 30%.a) Calculate Mountain Home's additional net income.b) If Mountain Home can turn its receivables over 4 times peryear, what will its additional investment in accounts receivable beand what will the firm earn as an after-tax return on thatinvestment?

Step 1: Define Receivables Turnover RatioThe accounts receivable turnover ratio is an indication of…

Answered: Mountain Home Systems, Inc. is a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 5P

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Comdex Inc. manufactures parts for the telecom industry. One of its products that currently sells for $160 is now facing a new competitor that offers the same product for $140. The parts currently cost Comdex $130. Comdex believes it must reduce its price to $140 to remain competitive. What is the target cost of the product if Comdex desires a 25% profit on sales dollars?
Phlight Restaurant is considering a delivery service. The firm expects that sales from the new service will be $150,000 per year. Phlight currently offers a sit-down service with annual sales of $100,000. While many of the delivery sales will be to new customers, Phlight estimates that 60% of their current sit-down customers will switch and use the delivery service. The level of incremental sales associated with introducing the delivery service is closest to: Select one: a. $90,000 b. $150,000 c. $60,000 d. $120,000
A large electronic retailer is considering the purchase of software that will minimize shipping expenses in its supply chain network. This software, including installation and training, would be a $10-million investment for the retailer. If the firm’s effective interest rate is 15% per year and the life of the software is four years, what annual savings in shipping expenses must there be to justify the purchase of the software?
Seattle Radiology Group plans to invest in a new CT scanner. The group estimates $1,500 net revenue per scan. Preliminary market assessments indicate that demand will be less than 5,000 scans per year. The group is considering a scanner (Scanner B) that would result in total fixed costs of $800,000 and would yield a profit of $450,000 per year at a volume of 5,000 scans. What is the estimated breakeven volume (in number of scans) for Scanner B?
Under pressure from its board of directors, management at Roadside is planning to enter the conventional battery-powered flashlight market. Roadside expects to sell this boring product to wholesalers for $18.16 per unit. Relevant fixed costs will total $343,600, and variable costs to make this product will be $12.15 per unit. Background research estimates the size of the market for conventional flashlights at 1.8 million units per year. If sales of this unit reach breakeven, what market share will Roadside have? Report your answer as a percent. Report 27.5%, for example, as "27.5". Rounding: tenth of a percent. Your Answer: Answer
Expo Lube is interested in producing and selling an industrial line of oil filters. Market research indicates that wholesale customers are currently willing to pay $8 for similar filters, and that Expo Lube could sell 80,000 units per year at that price. a. If Expo Lube requires a 19 percent return on sales, what is its target cost for the proposed industrial line of filters? b. Assume that market research reveals several of Expo Lube’s direct competitors are likely to lower the wholesale price of similar filters to $7 per unit. To remain competitive, what will Expo Lube’s target cost have to be to maintain a 19 percent return on sales? c. At a wholesale price of $7, Expo Lube estimates that it can sell 83,100 industrial filters per year instead of 80,000 units. Assuming its target costs are attainable, how much more or less profit per year will the company earn at the $7 wholesale price compared to the initial wholesale price estimate of $8?
Global Reach, Inc., is considering opening a new warehouse to serve the Southwest region. Darnell Moore, controller for Global Reach, has been reading about the advantages of foreign trade zones. He wonders if locating in one would be of benefit to his company, which imports about 90 percent of its merchandise (e.g., chess sets from the Philippines, jewelry from Thailand, pottery from Mexico, etc.). Darnell estimates that the new warehouse will store imported merchandise costing about 16.78 million per year. Inventory shrinkage at the warehouse (due to breakage and mishandling) is about 8 percent of the total. The average tariff rate on these imports is 5.5 percent. Required: 1. If Global Reach locates the warehouse in a foreign trade zone, how much will be saved in tariffs? Why? (Round your answer to the nearest dollar.) 2. Suppose that, on average, the merchandise stays in a Global Reach warehouse for nine months before shipment to retailers. Carrying cost for Global Reach is 6 percent per year. If Global Reach locates the warehouse in a foreign trade zone, how much will be saved in carrying costs? What will the total tariff-related savings be? (Round your answers to the nearest dollar.) 3. Suppose that the shifting economic situation leads to a new tariff rate of 13 percent, and a new carrying cost of 6.5 percent per year. To combat these increases, Global Reach has instituted a total quality program emphasizing reducing shrinkage. The new shrinkage rate is 7 percent. Given this new information, if Global Reach locates the warehouse in a foreign trade zone, how much will be saved in carrying costs? What will the total tariff-related savings be? (Round your answers to the nearest dollar.)
Shimada Products Corporation of Japan is anxious to enter the electronic calculator market. Management believes that in order to be competitive in world markets, the price of the electronic calculator that the company is developing cannot exceed $15. Shimada’s required rate of return is 12% on all investments. An investment of $5,000,000 would be required to purchase the equipment needed to produce the 300,000 calculators that management believes can be sold each year at the $15 price.Required:Compute the target cost of one calculator.
Expando, Inc. is considering the possibility of building an additional factory that would produce a new addition to its product line. The company is currently considering two options. The first is a small facility that it could build at a cost of $7 million. If demand for new products is low, the company expects to receive $11 million in discounted revenues (present value of future revenues) with the small facility. On the other hand, if demand is high, it expects $14 million in discounted revenues using the small facility. The second option is to build a large factory at a cost of $12 million. Were demand to be low, the company would expect $13 million in discounted revenues with the large plant. If demand is high, the company estimates that the discounted revenues would be $17 million. In either case, the probability of demand being high is 0.50, and the probability of it being low is 0.50. Not constructing a new factory would result in no additional revenue being generated because…
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 %
Eastern Auto Supply Limited produces and distributes auto supplies. The company is anxious to enter the rapidly growing market for long-life batteries that is based on lithium technology. Management believes that to be full competitive the new battery that the company is planning can’t be priced at more than Tk. 130. At this price management is confident that the company can sell 100,000 batteries per year. The batteries would require an investment of Tk. 5,000,000 and the desired ROI is 20%. Required: Compute the target cost of one battery.
B&B has a new baby powder ready to market. If the firm goes directly to the market with the product, there is only a 55 percent chance of success. However, the firm can conduct customer segment research, which will take a year and cost $1.18 million. By going through research, the company will be able to better target potential customers and will increase the probability of success to 70 percent. If successful, the baby powder will bring a present value profit (at time of initial selling) of $18.8 million. If unsuccessful, the present value payoff is only $5.8 million. The appropriate discount rate is 15 percent. Calculate the NPV for the firm if it goes to market immediately and if it conducts customer segment research. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)

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