Compute the after-tax return on investment

Assignment Help Business Economics
Reference no: EM132285952

The new credit manager of Kay's department store plans to liberalize the firm's credit policy. The firm currently generates credit sales of $575,000 annually. The more lenient credit policy is expected to produce credit sales of $750,000. The bad debt losses on additional sales are projected to be 5% despite an additional $15,000 collection expenditure. The new manager anticipates production and selling costs other than additional bad debt and collection expense will remain at the 85% level. The firm is in the 34% tax bracket.

A. If the firm maintains its receivables turnover of 10 times, how much will the receivables balance increase?

B. What would be Kay's incremental after-tax return on investment?

C. Assuming additional inventory of $35,000 is required to support the additional sales compute the after-tax return on investment?

Inland Service is considering changing its credit terms from net 15 to net 30. If this change is made, the average collection period will increase from 20 days to 40 days and 50 Million of new sales will be added to its current sales level of 30 Million. The bad debts for their new customer are expected to be 20% of sales. Inland's variable costs are 75% of sales and its tax rate is 46%. Should Inland extend the credit period to 30 days?

Reference no: EM132285952

Questions Cloud

Determine what business intelligence is : Business Intelligence - Write a critical review of how your product meets the original requirement. Plus time permitted what improvements/alterations would
Responsible for a new recruit induction : The line manager is responsible for a new recruit's induction, but they would not be expected to cover all the elements as part of their job role.
How do greek gods differ from egyptian gods : How do Greek gods differ from Egyptian gods? Provide at least three specific examples from both Greek and Egyptian gods in your analysis.
Find fits the model of perfect competition : Describe another industry that you find fits the model of perfect competition.
Compute the after-tax return on investment : Assuming additional inventory of $35,000 is required to support the additional sales compute the after-tax return on investment?
Highly accurate cost estimation at project initiation : Should project managers deliver highly accurate cost estimation at project initiation? Why or why not?
Summarize content of the article related to threat modeling : For this assignment, you will select a current article (within the last 2 years) or research paper to review. You may select any article or research paper that.
How would you collaborate with managers : How would you collaborate with managers in other sections to determine future human resources needs?
Review one transnational crime : Examine the extent to which crime statistics compiled in different countries can adequately be compared. Provide support for the response.

Reviews

Write a Review

Business Economics Questions & Answers

  Illustrate what is natural rate of unemployment

structural unemployment of 2 percent, seasonal unemployment of 0.5 percent and cyclical unemployment of 2 percent, illustrate what is natural rate of unemployment.

  Price elasticity of demand for winter wheat

Using the midpoint method, calculate the price elasticity of demand for winter wheat.

  Level that balances supply and demand

What would be reasons a worker's wages might be above the level that balances supply and demand?

  What trade theories support the recent rise of china

What trade theories support the recent rise of China and India on the global stage? How?

  Pseudocode for a database consisting of two major sets

The aim of this project write the Logic and Pseudocode for a database consisting of two major sets of tables - personal related and medical related.

  Texas government-projection may cause bandwagon effect

Why might some argue that news stations ought to stick to reporting what is actually happening on Election Day rather than making projections? Projection may cause a bandwagon effect. Projections based on push-polls may be inaccurate.

  Farmers optimal solution in free market using marginal cost

In your own words, explain the farmer’s optimal solution in the free market using marginal cost analysis. How might this solution be suboptimal from society’s perspective? Explain who benefits and is harmed under the free market solution. Explain who..

  Mutually exclusive alternatives

Using a 10% interest rate and an annual cash flow analysis, which alternative should be selected?

  Are the stores customers making a systematic error

The coffee shop near the local college normally sells 10 ounces of roasted coffee beans for $10. But the shop sometimes puts the beans on sale. During some sales, it offers "33 percent more for free." Other weeks, it takes "33 percent off" the normal..

  Price increase makes the agent worse off

Previously, we have considered agents whose income is fixed independently of prices. For this problem, consider instead an agent whose income comes from selling his endowment omega, where omega_1 > 0 and omega_2 > 0. Give an example where this price ..

  Senior citizens deserve income that will allow them to live

"Senior citizens deserve an income that will allow them to live in comfort for their remaining years."

  Attribute the difference to the effects of unionization

In trying to measure the extent to which labor unions are responsible for increasing wages, economists use sophisticated statistical methods to compare the wages of unionized workers with those of non-unionized workers. Explain why it is not legitima..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd