Mountain health system additional net income from new sales

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Reference no: EM131976883

Mountain Health System, Inc. is a well-known and reputable supplier of integrated heart monitoring devices. The firm is currently debating whether to expand its sales overseas. While the firm expects an extra $3,400,000 in sales if it enters foreign markets, it also knows that 12% of its sales will ultimately be uncollectible. In addition, selling costs will be 4% on all new sales and the firm's production costs are 75% of sales. Mountain Health System’s tax rate is 20%. (PLEASE SHOW YOUR WORK).

a) Calculate Mountain Health System’s additional net income from the new sales.

b) If the average investment in accounts receivable is $1,000,000 and management requires that any new project earn a minimum of 9% return on investment. Should the firm enter the foreign markets? Please explain.

Reference no: EM131976883

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