BUSI 320 Comprehensive Problem 2 FALL 2019
You possess been asked to assess the expected financial application of each of the forthcoming propositions to amend the profitability of honor sales made by your congregation. Each proposition is defiant of the other. Answer all questions. Showing your fruit may gain you unfair honor.
Proposal #1 would apply employment honor to some customers that previously possess been deprived honor owing they were considered insufficient risks. Sales are contemplated to growth by $200,000 per year if honor is applyed to these new customers. Of the new accounts receivable generated, 7% are contemplated to be uncollectible. Additional gathering consumes are contemplated to be 3% of incremental sales (whether they in-fact end up self-possessed or not), and origination and selling consumes are contemplated to be 80% of sales. Your fixed expects to pay a whole of 30% of its allowance succeeding charges in taxes.
1) Compute the incremental allowance succeeding taxes that would conclusion from these projections:
2) Compute the incremental Return on Sales if these new honor customers are accepted:
If the receivable turnover reference is expected to be 4 to 1 and no other asset buildup is needed to accommodate the new customers…
3) Compute the additional cannonade in Accounts Receivable
4) Compute the incremental Return on New Investment
5) If your congregation requires a 20% Blame of Return on Cannonade for all propositions, do the completion propose that employment honor should be applyed to these new customers? Explain.
Proposal #2 would found national gathering centers throughout the district to lower the duration it takes to turn honor payments that are mailed in by cohibit to specie. It is estimated that founding these gathering centers would contract the mean gathering duration by 2 days.
1) If the congregation currently means $60,000 in gatherings per day, how sundry dollars allure this proposeed specie government plan uncounted up?
2) If all uncountedd up dollars would be used to pay down something-due that has an profit blame of 5%, how fur specie could be saved each year in profit charge?
3) Do the completion propose that this new plan should be implemented if its whole annual consume is $5200? Explain.