22.3

Global Services is considering a promotional campaign that will ncrease annual credit sales by $570,000. The company will require investments in accounts receivable, inventory, and plant and Accounts receivable Inventory Plant and equipment 3 times 6 times 1 time All $570,000 of the sales will be collectible. However, collection costs will be 3 percent of sales, and production and selling costs will be 70 percent of sales. The cost to carry inventory will be 6 percent of inventory. Depreciation expense on plant and equipment will be 5 percent of plant and equipment. The tax rate is 30 percent. g-1. What is the aftertax rate of return? (Input your answer as a percent rounded to 2 decimal places.) Aftertax rate of return g-2. If the firm has a required return on investment of 8 percent, should it undertake the promotional campaign described throughout this problem? O Yes O No