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Unformatted text preview: $ 4,480 Return on incremental investment= c. Should Collins liberalize credit if a 15 percent after tax return on investment is required? Yes, because 28% is more than the required return of 15%. Assume Collins also needs to increase its level of inventory to support new sales and that inventory turnover is four times. 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 incremental investment: Inventory $20,000 Accounts Receivable 16,000 Incremental Investment $36,000 Return on Investment e. Given the income determined in part b and the investment determined in part d, should Collins extend more liberal credit terms? No, 12.44% is lower than the required return of 15%....
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This note was uploaded on 11/09/2010 for the course FIN 200 FIN 200 taught by Professor Smith during the Spring '10 term at University of Phoenix.
- Spring '10