Ted&Barny Canoes Co. is considering relaxing its credit standards to encourage more sales. As a result, sales are expected to increase 15 percent from 300 canoes per year to 345 canoes per year. The average collection period is expected to increase to 40 days from 30 days and bad debts are expected to double the current 1 percent level. The price per canoe is $850, the variable cost per canoe is $650 and the average cost per unit at the 300 unit level is $700. The firm's required return on investment is 20 percent. (Assume a 360-day year). Should the firm implement the proposed plan?

Apollo Data Systems is considering a promotional campaign that will increase annual credit sales by $528,000. The company has a 60% cost of goods sold and will require investments in accounts receivable, inventory, and plant and equipment. The turnover for each is as follows: Accounts receivable Inventory Plant and equipment 5x 8x 2x All $528,000 of the sales will be collectible. However, collection costs will be 4 percent of sales, and production and selling costs will be 78 percent of sales. The cost to carry inventory will be 10 percent of inventory. Amortization expense on plant and equipment will be 5 percent of plant and equipment. The tax rate is 30 percent. Inventory is calculated using cost of goods sold and not sales. a. Compute the investments in accounts receivable, inventory, and plant and equipment based on the turnover ratios. What is the total value of the investment made? Accounts receivable Inventory Plant and equipment Total Investment $ $ $ b. Compute the accounts…

Meyerson's Bakery is considering the addition of a new line of pies to its product offerings. It is expected that each pie will sell for $15 and the variable costs per pie will be $9. Total fixed operating costs are expected to be $25,000. Meyerson's faces a marginal tax rate of 35%, will have interest expense associated with this line of $3,500, and expects to sell about 4,200 pies in the first year. a. Create an income statement for the pie line's first year. Is the line expected to be profitable? b. Calculate the operating break-even point in both units and dollars. How many pies would Meyerson's need to sell in order to achieve EBIT of $20,000? C. d. Use the Goal Seek tool to determine the selling price per pie that would allow Meyerson's to break even in terms of its net income. e. Calculate the DOL, DFL, and DCL for the new pie line.

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Hyperion, Inc. currently sells its latest​ high-speed colour​ printer, the Hyper​ 500, for $371. It plans to lower the price to $318 next year. Its cost of goods sold for the Hyper 500 is $212 per​ unit, and this​ year's sales are expected to be 21,000 units.   a. Suppose​ that, if Hyperion drops the price to $318 ​immediately, it can increase this​ year's sales by 27% to 26,670 units. What would be the incremental impact on this​ year's EBIT of such a price​ drop?   b. Suppose​ that, for each printer​ sold, Hyperion expects additional sales of $78 per year on ink cartridges for the three​ years, and Hyperion has a gross profit margin of 61% on ink cartridges. What is the incremental impact on EBIT for the next three years of a price drop this​ year?

quick computing currently sells 7 million computer chips each year at a price of $12 per chip. It is about to introduce a new chip, and it forecasts annual sales of 22 million of these improved chips at a price of $15 each.  However, demand for the old chip will decrease, and sales of the old chip are expected to fall to 1 million per year.  The old chips cost $6 each to manufacture, and the new ones will cost $10 each.  What is the proper cash flow to use to evaluate the present value of the introduction of the new chip?

Shue Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $24,100, and the company expects to sell 1,580 per year. The company currently sells 1,930 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,600 units per year. The old board retails for $22,500. Variable costs are 53 percent of sales, depreciation on the equipment to produce the new board will be $1,395,000 per year, and fixed costs are $3,100,000 per year. If the tax rate is 23 percent, what is the annual OCF for the project? Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32. OCF

Selena Corporation is currently considering relaxing its credit standards. Based on the analysis done, relaxing credit standard will potentially increase sales by 5%. Selena Corporation is currently selling 400 units with selling price of P700. Variable costs per unit based on status quo is at P400.  The average total cost per unit is P425. What is the additional profit contribution from sales if credit standards are relaxed?