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Henderson Office Supply is considering a more liberal credit policy to increase sales, but expects that 9 percent of the new accounts will be uncollectible. Collection costs are 2 percent of new sales, production and selling costs are 80 percent, and the accounts receivable turnover is two times. Assume income taxes of 20 percent and an increase in sales of $71,000. No other asset buildup will be required to service the new accounts. a. What additional investment in accounts receivable is needed to support this sales expansion? b. What would be Henderson’s incremental aftertax return on investment? (Input your answer as a percent rounded to 2 decimal places.) c. Should Henderson liberalize credit if a 9 percent aftertax return on investment is required? Yes No Assume that Henderson also needs to increase its level of inventory to support new sales and that the inventory turnover is five times. d. What would be the total incremental investment in accounts receivable and inventory needed to support a $71,000 increase in sales? e. Given the income determined in part b and the investment determined in part d, should Henderson extend more liberal credit terms? No Yes
Medical Devices just paid its annual regular cash dividend of $1.90 a share, along with a special dividend of $0.60 a share. The company follows a policy of increasing its dividend by 3 percent annually. Which one of the following is the best estimat..
This morning, you purchased a call option on Schoolhouse Supply Co. stock that expires in one year. The exercise price is $37.60. The current price of the stock is $53.70 and the risk-free rate of return is 3.1 percent. Assume that the option will fi..
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Your project is progressing well in your estimation. Your team has collected the following data. From these data, calculate the project’s ETC. Activity A is 60% complete at a cost so far of $50,000. It was estimated to cost $200,000 when finished. It..
During the current year, a firm had sales of 1,500,000; cost of goods sold of 1,245,000 selling and administration expenses of 187,500; depreciation of 217,500; and, interest expense of 97,500. The tax rate is 35%. What is the corporation’s operating..
Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. What is the NPV of the ..
Compute the accrued coupon of a bond sold the 1st of November 2012 if the bond offers an annual coupon rate of 7%,
Dodd Frank and consumer protection regulation was introduced after the 2007-8 financial crises.
The Battle Creek Breakfast Food Company has developed a new breakfast cereal which it is considering for full-scale production. Development costs have totaled $1,200,000. If the new cereal goes into production, the company expects to receive $12 per ..
Joan Wallace, corporate finance specialist for Big Blazer Bumpers, is responsible for funding an account to cover anticipated future warranty costs.- How much does Joan have to place into an account today earning 10 percent per year to cover these ..
How many different types solve of translation exposure, transaction exposure, operating exposure and economic exposure?
What are the Earnings Surprises for the stock POOL with the announcement date of October 22, 2015? Also how many forecasts were there of the EPS for the stock POOL corp. and what was each forecast and the average for it?
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