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Global Services is considering a promotional campaign that will increase annual credit sales by $630,000. The company will require investments in accounts receivable, inventory, and

Global Services is considering a promotional campaign that will increase annual credit sales by $630,000. The company will require investments in accounts receivable, inventory, and plant and equipment. The turnover for each is as follows: Accounts receivable 5x Inventory 4x Plant and equipment 3x All $630,000 of the sales will be collectible. However, collection costs will be 4 percent of sales, and production and selling costs will be 74 percent of sales. The cost to carry inventory will be 8 percent of inventory. Depreciation expense on plant and equipment will be 20 percent of plant and equipment. The tax rate is 25 percent. (a) What is the value for inventory investment? (Omit the "$" sign in your response.) Inventory investment $ (b-1) Compute the total investment. (Omit the "$" sign in your response.) Total investment $ (b-2) Compute the cost of carrying inventory. (Omit the "$" sign in your response.) Cost of carrying inventory $ (b-3) Compute income after taxes. (Omit the "$" sign in your response.) Income after taxes $ (b-4) What would be the return on investment? (Round your answer to 2 decimal places. Omit the "%" sign in your response.) Return on investment % (b-5) If the required rate of return is 14 percent, should the campaign be undertaken? No Yes

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