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Unformatted text preview: Assume Collins also needs to increase its level of inventory to support new sales and that inventory turnover is four times. Yes, 28% exceeds 15% which is the required return. d. What would be the total incremental investment in accounts receivable and inventory to support an $80,000 increase in sales? Investment in inventory = total increment investment inventory $20,000 Inventory = $80,000/4 = $20,000 $20,000 + $16,000 = $36,000 $4,480/$36,000 = 12.4% e. Given the income determined in part b and the investment determined in part d, should Collins extend more liberal credit terms? No, because 12.4% is less than the required 15%....
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This note was uploaded on 06/26/2010 for the course FIN FIN 200 taught by Professor Banton during the Spring '10 term at University of Phoenix.
- Spring '10