User Account

All Pages

Calculate the cost of the marginal investment

Assignment Help Finance Basics
Reference no: EM131109351

Tara's Textiles currently has credit sales of $360 million per year and an average collection period of 60 days. Assume that the price of Tara's products is $60 per unit and that the variable costs are $55 per unit. The firm is considering an accounts receivable change that will result in a 20% increase in sales and a 20% increase in the average collection period. No change in bad debts is expected. The firm's equal-risk opportunity cost on its investment in accounts receivable is 14%. (Note: Use a 365-day year.)

a. Calculate the additional profit contribution from sales that the firm will realize if it makes the proposed change.

b. What marginal investment in accounts receivable will result?

c. Calculate the cost of the marginal investment in accounts receivable.

d. Should the firm implement the proposed change? What other information would be helpful in your analysis?

Reference no: EM131109351

Questions Cloud

Evaluate the proposed relaxation, and make a recommendation : he sale price per unit is $40, and the variable cost per unit is $31. The firm's required return on equal-risk investments is 25%. Evaluate the proposed relaxation, and make a recommendation to the firm.
Topic of intercultural communication and leadership : Go to the library or use Google Books to look up a book on the topic of intercultural communication and leadership (e.g., Collard & Normore, 2009; Jones, 2000; Moodian, 2008). What does it suggest about the multicultural communication of effect..
Is intelligent design theory scientific : You are being protected in a secluded hotel from ACLU lawyers and right-wing demonstration groups. Here is your question: is intelligent design theory scientific
What are bad debts in dollars currently : What are bad debts in dollars currently and under the proposed change? Calculate the cost of the marginal bad debts to the firm.
Calculate the cost of the marginal investment : Calculate the cost of the marginal investment in accounts receivable. Should the firm implement the proposed change? What other information would be helpful in your analysis?
Calculate the total true cost for each vehicle : Calculate the total "true" cost for each vehicle over the 5-year ownership period. Calculate the total fuel cost for each vehicle over the 5-year ownership period. What is the marginal fuel cost from purchasing the larger V-8 SUV?
How many students are expected to attend graduation : A random sample of starting salaries for an engineer are: $40,000, $40,000, $48,000, $55,000 and $67,000. Find the following and show all work. Include equations, a table or EXCEL work, to show how you found your solution.
Describing the decrease in the number of customer : Jordan, the sales manager of a local car rental service, wants to write a report describing the decrease in the number of customer complaints. He is trying to decide between using a bar chart or a line graph to supplement his discussion in the rep..
Electronic mail from a team member : Lisa Robinson is a sales manager at a bank. She recently received an electronic mail from a team member, John Hill, requesting leave during Christmas. Though the mail was formulated well, she felt like Hill was shouting at her. Which of the follow..

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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