Loose Leaf for Foundations of Financial Management Format: Loose-leaf
17th Edition
ISBN: 9781260464924
Author: BLOCK
Publisher: Mcgraw Hill Publishers
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Chapter 7, Problem 17P
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by
a. Compute the incremental income after taxes.
b. What will Johnson’s incremental return on sales be if these new credit customers are accepted?
c. If the receivable turnover ratio is 3 to 1 and no other asset buildup is needed to serve the new customers, what will Johnson’s incremental return on new average investment be?
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Sunny Manufacturing is considering extending trade credit to some customers previously considered poor risks. Sales would increase
by $220,000 if credit is extended to these new customers. Of the new accounts receivable generated, 10 percent will prove to be
uncollectible. Additional collection costs will be 5 percent of sales, and production and selling costs will be 70 percent of sales.
a. Compute the incremental income before taxes.
$
Incremental income before taxes
b. What will the firm's incremental return on sales be if these new credit customers are accepted? (Round the final answer to 2
decimal place.)
Incremental return on sales
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c. If the receivable turnover ratio is 4 to 1, and no other asset buildup is needed to serve the new customers, what will Sunny
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Incremental return on new average investment
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Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $270,000 if credit is extended to these new customers. Of the new accounts receivable generated, 9 percent will prove to be uncollectible. Additional collection costs will be 6 percent of sales, and production and selling costs will be 75 percent of sales.
1. Compute the incremental income before taxes.
2. What will the firm’s incremental return on sales be if these new credit customers are accepted? (Round final answer to 2 decimals)
3. If the receivable turnover ratio is 5 to 1, and no other asset buildup is needed to serve the new customers, what will Johnson Electronics’ incremental return on new average investment be? (Round only the final answer to %)
Jamboo Corporation is considering extending trade credit to some customers previously
considered poor risks.
Sales would increase by $230009 if credit is extended.
Of the new accounts receivable generated, 10 percent will prove to be uncollectible.
Additional collection costs will be 5 percent of sales, and production and selling costs
will be 75 percent of sales.
The firm needs to pay 1,500 tax on additional sales.
Compute Net income after tax.
ANSWER FORMAT: 1234.56
Answer:
Chapter 7 Solutions
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
Ch. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Why would a financial manager want to slow down...Ch. 7 - Use The Wall Street Journal or some other...Ch. 7 - Why are Treasury bills a favorite place for...Ch. 7 - Explain why the bad debt percentage or any other...Ch. 7 - What are three quantitative measures that can be...Ch. 7 - Prob. 8DQCh. 7 - What does the EOQ formula tell us? What assumption...Ch. 7 - Why might a firm keep a safety stock? What effect...
Ch. 7 - If a firm uses a just-in-time inventory system,...Ch. 7 - City Farm Insurance has collection centers across...Ch. 7 - Prob. 2PCh. 7 - Orbital Communications has operating plants in...Ch. 7 - Postal Express has outlets throughout the world....Ch. 7 - Thompson Wood Products has credit sales of...Ch. 7 - Oral Roberts Dental Supplies has annual sales of...Ch. 7 - Knight Roundtable Co. has annual credit sales of...Ch. 7 - Darla’s Cosmetics has annual credit sales of...Ch. 7 - Barney’s Antique Shop has annual credit sales of...Ch. 7 - Mervyn’s Fine Fashions has an average collection...Ch. 7 - Route Canal Shipping Company has the following...Ch. 7 - Nowlin Pipe & Steel has projected sales of 72,000...Ch. 7 - Fisk Corporation is trying to improve its...Ch. 7 - Prob. 14PCh. 7 - Diagnostic Supplies has expected sales of 84,100...Ch. 7 - Wisconsin Snowmobile Corp. is considering a switch...Ch. 7 - Johnson Electronics is considering extending trade...Ch. 7 - Henderson Office Supply is considering a more...Ch. 7 - Fast Turnstiles Co. is evaluating the extension of...Ch. 7 - Slow Roll Drum Co. is evaluating the extension of...Ch. 7 - Global Services is considering a promotional...Ch. 7 - Problems 22-25 are a series and should be...Ch. 7 - Problems 22-25 are a series and should be...Ch. 7 - Problems 22-25 are a series and should be...Ch. 7 - Problems 22-25 are a series and should be...
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