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A firm is considering relaxing credit standards which will result in an increase in annual sales from $3 million to $3.30million, an increase in the cost of annual sales from $2,700.000 to $2,970,000, an increase in additional profit contribution from sales of $10,000, and an increase in the average collection period of 15 days, from 20 to 35 days. The bad debt loss is expected to increase from 1 percent to 1.5 percent of sales. The firm's required return on investments is 15 percent. The net result of the firm relaxing its credit standards is year.) (Assume a 360-day a) Culcvlete the resvtirg change ia the prokit cntrihvtian (o) What iu the Runge i thelevel ef accounts receivabte Cwhuis the change in the cost of cavryin rece abes d) iwh at is the change i bad dle se I W 7 C ne+ efect ct relaving cvedt sta nda vois e whatis the that is, uhat i f benetit o ost 7 sheuld he fivm make the charye s he net amount 2 Studio Sa arn, a dealer in contemporary art, has forecasted its seasonal financing next six months as follows: Month January February March April May Seasonal Requirement 1,895,00O 2,000,000 1.575,0O0 1,342,000 1,552, C00 $1,450 funds will cost 13 (a) The fi percent annually (b) The rm projects that short-term funds will cost 10 percent and long-term firm's permanent funds requirement is $600,000 ative financing costs for the first six months using the () aggressive and (2) conser Assume Ecess funds net needed duvingamonth Con strategies C55 t rate Tim purchased a bounce house one year ago for $6,500. During the year it generated $3,000 in cash flow. If Time sells the bounce house today, he could receive $6,200 for it. What would be his rate of return under these conditions? alem s Construct the DuPont system of analysis using the following finan Industries and determine which areas of the firm need further analysis. cial data for Key Wahl Key Financial Data Key Wahl Industries Sales Net profits after taxes Total assets Total liabilities Co) Caleulde the Debt ratioewal $4,500,000 337,500 Chlevu T asset Trnover 6,750,000 3,375,000 (C) C 0.71 d)siow how RoA is hvohen into 33.00% Industry Averages: Total asset turnover Debt ratio Financial leverage multiplier 6.7550 (e) (clidate Ro E and show how it Return on total assets Return on equity Net profit margin 10.00% 9.50% l per fevmanee C) Evalute key Wah ii cam parisons tw in dustry fsures and suggest areas of impravement