Calculate wilson incremental accounts receivable investment

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Wilson Co. is a highly successful supplier of leather to manufacturers of leather goods. Wilson is considering expanding into the U.S. luxury auto seat market. It is estimated that although selling leather to U.S. auto manufacturers will bring additional annual sales of $1,000,000, a high 10% of those accounts will be uncollectible. The cost of conditioning and selling the leather is 60% of sales.Wilson's tax rate is 30%.

a) Calculate Tanner's incremental net income on the new sales.

b) Assume Wilson has a receivables turnover of 4. Calculate Wilson's incremental accounts receivable investment and after-tax return on that investment.

c) Wilson's minimum required ROI is 15%. Should Wilson expand into the auto market? Why or why not?

Reference no: EM131891770

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