Answered step by step
Verified Expert Solution
Question
1 Approved Answer
just need help solving the rate of return. Apollo Data Systems is considering a promotional campaign that wil increase annual credit sales by $548,000. The
just need help solving the rate of return.
Apollo Data Systems is considering a promotional campaign that wil increase annual credit sales by $548,000. The company has a 60% cost of goods soid and will require investments in accounts receivable, inventory, and plant and equipment. The tumover for coch is as follows: All $548.000 of the soles wili be collectible. However, collection costs will be 4 percent of sales, and production and selting costs will be 72 percent of sales. The cost to carry inventory will be 10 percent of inventory. Amortization expense on plant and equipment will be 4 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 imvestments in occounts receivable, inventory, and plant and equipment bosed on the turnover ratios. What is the total value of the investment made? b. Compute the accounts recelvable collection costs and production and sellinn costs and add the two figures together. c. Compute the costs of carrying inventory. Cost of carrying inventery d. Compute the amortization expense on new plant and equipment. Amortization expense e. Add together all the costs in parts b, c, and d Total cost 9. If the firm has required return on investment of 14 percent, should it undertake the promotional campaign described throughout this problem? Yes 0 No Problem 7-27 In the previous problem, if inventory had only been 2 times: a. What would be the new value for inventory investment? Inventory investment b.1 What would be the return on investment? You need to recompute the total investment and the total costs of the campaign to work toward computing income after taxes. (Round the final answer to 1 decimal place.) Rate of return () % b. 2 Should the campaign be undertakem Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started