Henderson Office Supply is considering a more liberal credit policy to increase sales, but expects that...
Henderson Office Supply is considering a more liberal credit policy to increase sales, but expects that 9 percent of the new accounts will be uncollectable. Collection costs are 6 percent of new sales, production and selling costs are 74 percent, and accounts receivable turnover is four times. Assume income taxes are 20 percent and an increase in sales of $65,000. No other asset buildup will be required to service the new accounts.
A) What is the level of accounts receivable to support this sales expansion?
B) What would be Henderson�s incremental after-tax return on investment?
C) Should Henderson liberalize credit if a 16 percent after-tax return on investment is required?
Assume that Henderson also needs to increase its level of inventory to support new sales and that inventory turnover is two times.
D) What would be the total incremental investment in accounts receivable and inventory to support a $65,000 increase in sales?
E) Given the income determined in part b and the investment determined in part d, should Henderson extend more liberal credit terms?
Please only answer if you know the topic. Thank you
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Henderson Office Supply is considering a more liberal credit
policy to increase sales, but expects that...
Henderson Office Supplies is considering a more liberal credit policy to increase sales, but it expects...
Henderson Office Supplies is considering a more liberal credit policy to increase sales, but it expects that 10 percent of the new accounts will be uncollectible. Collection costs are 4 percent of new sales, production costs are 76 percent of sales and accounts receivable turnover is four times. Assume an increase in sales of $78,000. No other asset buildup will be required to service the new accounts. a. What is the level of investment in accounts receivable to support this...
Henderson Office Supplies is considering a more liberal credit policy to increase sales, but it expects that 5 percent o...
Henderson Office Supplies is considering a more liberal credit policy to increase sales, but it expects that 5 percent of the new accounts will be uncollectible. Collection costs are 5 percent of new sales, production costs are 80 percent of sales, and accounts receivable turnover is five times. Assume an increase in sales of $79,000. No other asset buildup will be required to service the new accounts. a. What is the level of investment in accounts receivable to support this...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $146,000 if credit is extended to these new customers. Of the new accounts receivable generated, 8 percent will prove to be uncollectible. Additional collection costs will be 6 percent of sales, and production and selling costs will be 72 percent of sales. The firm is in the 10 percent tax bracket. a. Compute the incremental income after taxes. Incremental income after taxes...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $150,000 if credit is extended to these new customers. Of the new accounts receivable generated, 5 percent will prove to be uncollectible. Additional collection costs will be 2 percent of sales, and production and selling costs will be 74 percent of sales. The firm is in the 35 percent tax bracket. a. Compute the incremental income after taxes. Incremental income after taxes...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $250,000 if credit is extended to these new customers. Of the new accounts receivable generated, 7 percent will prove to be uncollectible. Additional collection costs will be 6 percent of sales, and production and selling costs ill be 70 percent of sales. The firm is in the 30 percent tax bracket a. Compute the incremental income after taxes. Incremental income after taxes...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $150,000 if credit is extended to these new customers. Of the new accounts receivable generated, 5 percent will prove to be uncollectible. Additional collection costs will be 2 percent of sales, and production and selling costs will be 74 percent of sales. The firm is in the 35 percent tax bracket. a. Compute the incremental income after taxes. Incremental income...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $150,000 if credit were extended to these new customers. Of the new accounts receivable generated, 5 percent will prove to be uncollectible. Additional collection costs will be 2 percent of sales, and production and selling costs will be 74 percent of sales. The firm is in the 35 percent tax bracket. a. Compute the incremental income after taxes. Incremental income after taxes...
Problem 7-22 Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although...
Problem 7-22 Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although these customers will provide $216,000 In additional credit sales, 14 percent are likely to be uncollectible. The company will incur $16,400 in additional collection expenses. Production and marketing expenses represent 72 percent of sales. The company has a receivables turnover of five times. No other asset buildup will be required to service the new customers. The firm has a 16 percent desired return on...
Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although these customers...
Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although these customers will provide $468,000 in additional credit sales, 11 percent are likely to be uncollectible. The company will incur $17,700 in additional collection expenses Production and marketing expenses represent 76 percent of sales. The company has a receivables turnover of five times. No other asset buildup will be required to service the new customers. The firm has a 17 percent desired return on investment 6-1....
Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although these customers...
Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although these customers will provide $180,000 in additional credit sales, 12 percent are likely to be uncollectible. The company will incur $16,200 in additional collection expenses. Production and marketing expenses represent 72 percent of sales. The company has a receivables turnover of four times. No other asset buildup will be required to service the new customers. The firm has a 20 percent desired return on investment. a-1....
Henderson Office Supplies is considering a more liberal credit policy to increase sales, but it expects that 10 percent of the new accounts will be uncollectible. Collection costs are 4 percent of new sales, production costs are 76 percent of sales and accounts receivable turnover is four times. Assume an increase in sales of $78,000. No other asset buildup will be required to service the new accounts. a. What is the level of investment in accounts receivable to support this...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $146,000 if credit is extended to these new customers. Of the new accounts receivable generated, 8 percent will prove to be uncollectible. Additional collection costs will be 6 percent of sales, and production and selling costs will be 72 percent of sales. The firm is in the 10 percent tax bracket. a. Compute the incremental income after taxes. Incremental income after taxes...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $150,000 if credit is extended to these new customers. Of the new accounts receivable generated, 5 percent will prove to be uncollectible. Additional collection costs will be 2 percent of sales, and production and selling costs will be 74 percent of sales. The firm is in the 35 percent tax bracket. a. Compute the incremental income after taxes. Incremental income after taxes...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $250,000 if credit is extended to these new customers. Of the new accounts receivable generated, 7 percent will prove to be uncollectible. Additional collection costs will be 6 percent of sales, and production and selling costs ill be 70 percent of sales. The firm is in the 30 percent tax bracket a. Compute the incremental income after taxes. Incremental income after taxes...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $150,000 if credit were extended to these new customers. Of the new accounts receivable generated, 5 percent will prove to be uncollectible. Additional collection costs will be 2 percent of sales, and production and selling costs will be 74 percent of sales. The firm is in the 35 percent tax bracket. a. Compute the incremental income after taxes. Incremental income after taxes...
Problem 7-22 Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although these customers will provide $216,000 In additional credit sales, 14 percent are likely to be uncollectible. The company will incur $16,400 in additional collection expenses. Production and marketing expenses represent 72 percent of sales. The company has a receivables turnover of five times. No other asset buildup will be required to service the new customers. The firm has a 16 percent desired return on...
Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although these customers will provide $468,000 in additional credit sales, 11 percent are likely to be uncollectible. The company will incur $17,700 in additional collection expenses Production and marketing expenses represent 76 percent of sales. The company has a receivables turnover of five times. No other asset buildup will be required to service the new customers. The firm has a 17 percent desired return on investment 6-1....
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