Proposal 1:- Q 1). Solution :-
Calculation of incremental income after taxes :-
Particulars | Amount ($) |
Incremental sales (-) Bad debts (10 % of 150000) (-) Collection costs (2 % of 150000) |
150000 15000 3000 |
Net incremental sales (-) Production and selling costs (78 % of 150000) |
132000 117000 |
Incremental income before tax (-) Tax (30 % of 15000) |
15000 4500 |
Incremental income after tax | 10500 |
Conclusion :- Incremental income after tax = $ 10500.
Proposal 1:- Q 2). Solution :- Incremental return on sales = Incremental income after tax / Incremental sales.
= 10500 / 150000
= 0.07 i.e., 7 %
Conclusion :- Incremental return on sales = 7 %
Proposal 1:- Q 3). Solution :- Additional investment in net receivables = 150000 / 4 = $ 37500.
Proposal 1:- Q 4). Solution :- Incremental return on new investment = Incremental income after tax / Net receivables.
= 10500 / 37500
= 0.28 i.e., 28 %
Conclusion :- Incremental return on new investment = 28 %.
Proposal 1:- Q 5). Answer :- Yes, The company will extend trade credit to its customer because incremental return on new investment (28 % as calculated in above question) will increase only from here.
BUSI 320 Comprehensive Problem 2 2019 Summer You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by yo...
BUSI 320 Comprehensive Problem 2 2019 Summer You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company. Each proposal is independent of the other. Answer all questions. Showing your work may eam you partial credit Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks. Sales are projected to increase by $150,000...
BUSI 320 Comprehensive Problem 2 Spring 2019 You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company. Each proposal is independent of the other. Answer all questions. Showing your work may earn you partial credit. Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks. Sales are projected to increase by $120,000...
BUSI 320 Comprehensive Problem 2 Spring 2019 You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company. Each proposal is independent of the other. Answer all questions. Showing your work may earn you partial credit. Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks. Sales are projected to increase by $120,000...
BUSI 320 Comprehensive Problem 2 FALL 2020 You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company. Each proposal is independent of the other. Answer all questions. Showing your work may earn you partial credit. Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks. Sales are projected to increase by $240,000...
You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company. Each proposal is independent of the other. Answer all questions. Showing your work may earn you partial credit. Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks. Sales are projected to increase by $120,000 per year if credit is extended to...
You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company. Each proposal is independent of the other. Answer all questions. Showing your work may earn you partial credit. Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks. Sales are projected to increase by $200,000 per year if credit is extended to...
You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company. Each proposal is independent of the other. Answer all questions. Showing your work may earn you partial credit. Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks. Sales are projected to increase by $240,000 per year if credit is extended to these...
You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company. Each proposal is independent of the other. Answer all questions. Type your answers in the table and submit this worksheet. Showing your work may earn you partial credit. If you wish to show your work, please do so under each question below the table. Your Answers: Proposal #1 1 2 3 4 5...
You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company. Each proposal is independent of the other. Answer all questions. Showing your work may earn you partial credit. Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks. Sales are projected to increase by $200,000 per year if credit is extended to...
P1 You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company. Each proposal is independent of the other. Answer all questions. Showing your work may earn you partial credit. Extend trade credit to some customers that previously have been denied credit because they were considered poor risks. Sales are projected to increase by $200,000 per year if credit is extended to these new...