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plsase fill the correct answers Apollo Data Systems is considering a promotional campaign that will increase annual credit sales by $708,000. The company has a
plsase fill the correct answers
Apollo Data Systems is considering a promotional campaign that will increase annual credit sales by $708,000. The company has a 40% cost of goods sold and will require investments in accounts receivable, inventory, and plant and equipment. The turnover for each is as follows: All $708,000 of the sales will be collectible. However, collection costs will be 3 percent of sales, and production and selling costs will be 75 percent of sales. The cost to carry inventory will be 10 percent of inventory. Amortization expense on plant and equipment will be 5 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 investments in accounts recelvable, inventory, and plant and equipment based on the furnover ratios. What is the total value of the investment made? b. Compute the accounts recelvable collection costs and production and selling costs and add the two figures together. c. Compute the costs of carrying inventory. Cost of carrying inventory 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 15 percent, shouid it undertake the promotional campaign described throughout this problem? Yes 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 undertaken? Yes Step by Step Solution
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