Problem 7.26 Apollo Data Systems is considering a promotional campaign that will increase annual credit sales by $628.000. The company 60% cost of goods sold and will require investments in accounts receivable, inventory, and plant and equipment. The turnover for each is as follows: SX Accounts receivable Inventory Plant and it 2 All $528,000 of the sales will be collectible. However, collection costs will be 4 percent of sales and production and selling costs will be 78 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 .. Compute the investments in accounts recewable Inventory and pukht and equipment based on the tumover tattos Wiat is the total value of the investment made? Accounts receivable Eventory Plant and equipment 5 Total Investment b. Compute the accounts receivable collection costs and production and selling costs and add the two figures together Collection cop Production and selling costs Total cost related to accounts receivable 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 and Total cost $ 1. Compute income after taxes Income after taxes $ if the firm has required return on investment of 11 percent should it undertake the promotional campaign described throughout this problem? ... e. Add together all the costs in parts and d. Total cost f. Compute income after taxes. Income after taxes $ g. If the firm has required return on investment of 11 percent, should it undertake the promotional campaign described throughout this problem? Yes O No Income after taxes g. If the firm has required return on investment of 11 percent should it undertake the promotional campaign described throughout this problem? nice O Yes O No Problem 7-27 In the previous problem. If inventory had only been 2 times a. What would be the new value for triventory 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