Question
Problem 7.26 Apollo Data Systems is considering a promotional campaign that will increase annual credit sales by $616,000. The company has a 40% cost of
Problem 7.26 Apollo Data Systems is considering a promotional campaign that will increase annual credit sales by $616,000. 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: Accounts receivable Inventory plant and equipment All $616,000 of the sales will be collectible. However, collection costs will be 4 percent of sales, and production and selling costs will be 80 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
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