b. Compute the accounts receivable collection costs and production and selling costs and then add the two figures together.Collection costProduction and selling costsTotal collection, production, and selling costsc. Compute the costs of carrying inventory.Cost of carrying inventoryd. Compute the depreciation expense on new plant and equipment.Depreciation expense Global Services is considering a promotional campaign that will increase annual credit sales by $650,000. The company willrequire investments in accounts receivable, inventory, and plant and equipment. The turnover for each is as follows:Accounts receivableInventoryPlant and equipment2 times4 times2 timesAll $650,000 of the sales will be collectible. However, collection costs will be 6 percent of sales, and production and sellingcosts will be 76 percent of sales. The cost to carry inventory will be 4 percent of inventory. Depreciation expense on plant andequipment will be 10 percent of plant and equipment. The tax rate is 35 percent.a. Compute the investments in accounts receivable, inventory, and plant and equipment based on the turnover ratios. Add thethree together.Accounts receivableInventoryPlant and equipmentTotal Investment

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Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Global Services is considering a promotional campaign that will increase annual credit sales by $590,000. The company will require investments in accounts receivable, inventory, and plant and equipment. The turnover for each is as follows: Accounts receivable 5 times Inventory 8 times Plant and equipment 4 times All $590,000 of the sales will be collectible. However, collection costs will be 5 percent of sales, and production and selling costs will be 70 percent of sales. The cost to carry inventory will be 8 percent of inventory. Depreciation expense on plant and equipment will be 20 percent of plant and equipment. The tax rate is 35 percent.a. Compute the investments in accounts receivable, inventory, and plant and equipment based on the turnover ratios. Add the three together. b. Compute the accounts receivable collection costs and production and selling costs and then add the two figures together. c. Compute the costs of carrying inventory.…
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The Milton Company currently purchases an average of $23,000 per day in raw materials on credit terms of "net 25." The company expects sales to increase substantially next year and anticipates that its raw material purchases will increase to an average of $26,000 per day. Milton feels that it may need to finance part of this sales expansion by stretching accounts payable. Round your answers to the nearest dollar. a. Assuming that Milton currently waits until the end of the credit period to pay its raw material suppliers, what is its current level of trade credit? $ 575,000 b. If Milton stretches its accounts payable an extra 5 days beyond the due date next year, how much additional short- term funds (that is, trade credit) will be generated? $
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. Compute the accounts receivable collection costs and production and selling costs and then add the two figures together. Collection cost Production and selling costs Total collection, production, and selling costs . Compute the costs of carrying inventory. Cost of carrying inventory