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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% will prove to be uncollectible. Additional collection costs will be 2 percent of sales, and production and selling costs will be 74% of sales. The firm is in the 35% tax bracket.
a. Compute the incremental income after taxes.
b. what will Johnson's incremental return on sales be if these new credit customers are accepted?
c. If the receivable turnover ratio is 3 to 1 and no other asset build-up is needed to serve the new customers, what will Johnson's incremental return on new average investment is?
Plush Pilots, Inc. has balance sheet equity of $5.2 million. At the same time, the income statement shows net income of $743,600. The company paid dividends of $423,852 and has 130,000 shares of stock outstanding. If the benchmark PE ratio is 21, wha..
What do you think can lean thinking be used to improve performance of the supply chain in meeting end customer demand by cutting out waste?
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We examined two very important topics in finance this week; Capital Budgeting and Dividend Policy.
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On July 1, 2010, Bill invested P into a fund which accumulates at an interest rate of 7% compounded monthly. On July 1, 2012, Judy invested 100 in a fund with a discount rate of 9% compounded quarterly. On July 1, 2010, the sum of the present value s..
The Corner Store has sales of $72,510, total assets of $60,400, a debt-equity ratio of 1.2, and a profit margin of 3 percent. What is the equity multiplier?
forecasting interest rates based on prevailing conditions.consider the prevailing conditions for the following factors
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