To justify changes in collection procedures, the minimum annual reduction of costs (using a 360-day year and ignoring taxes) must be

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…

Fizzy Animators, Inc. currently makes all sales on credit and offers no cash discount. The firm is considering a 2 percent cash discount for payment within 10 days. The firm's current average collection period is 90 days, sales are currently $1,000,000, variable cost is $600,000 (note the variable cost % is 60%). The firm expects that the change in credit terms will result in an increase in sales to $1,500,000 per year and variable costs will increase to $900,000 per year. Fizzy projects that 80 percent of the sales will take the discount, and the average collection period will drop to 30 days. The firm's required return on equal-risk investments is 10 percent. (Assume a 360-day year.) What is the cost (benefit) of the marginal cash discount? O ($18,000) O $24,000 ($22,000) O $30,000

Epstein Company, a wholesale distributor of jewelry, sells to retail jewelry stores on terms of "net 120." Its average collection period is 150 days. The company is con- sidering the introduction of a 4 percent cash discount if customers pay within 30 days. Such a change in credit terms is expected to reduce the average collection period to 108 days. Epstein expects 30 percent of its customers to take the cash discount. Annual credit sales are $6 million. Epstein's variable cost ratio is 0.667, and its required pretax return on receivables investment is 15 percent. The company does not expect its inventory level to change as a result of the change in credit terms. Determine the net effect on Epstein's pretax profits. Instruction: Please key in the relevant information in the blue cells in the Data Section. Then type formulas in the yellow cells to determine the net effect on Epstein's pretax profits. Data Section Cash discount Percent of customers taking discount Current average…