SkyTech Solutions, Inc. is a reputed supplier of high-quality semiconductors to electronics manufacturers. The company is considering expanding its sales to manufacturers of electric vehicles. It estimates additional sales of $3 million from this new market. However, it expects that 20% of sales will be uncollectible. Additionally, collection costs will be 3% of all new sales, and the firm's production and selling costs amount to 75% of sales. The tax rate is 25%. Requirements: a) Calculate SkyTech's additional net income. b) If SkyTech's receivables turnover is 5 times per year, what will its additional investment in accounts receivable be, and what will the firm earn as an after-tax return on that investment?

SkyTech Solutions, Inc. is a reputed supplier of high-quality semiconductors to electronics manufacturers. The company is considering expanding its sales to manufacturers of electric vehicles. It estimates additional sales of $3 million from this new market. However, it expects that 20% of sales will be uncollectible. Additionally, collection costs will be 3% of all new sales, and the firm's production and selling costs amount to 75% of sales. The tax rate is 25%. Requirements: a) Calculate SkyTech's additional net income. b) If SkyTech's receivables turnover is 5 times per year, what will its additional investment in accounts receivable be, and what will the firm earn as an after-tax return on that investment?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 14E: Global Reach, Inc., is considering opening a new warehouse to serve the Southwest region. Darnell...

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