2010-07-03_061149_Week_6-cooper

2010-07-03_061149_Week_6-cooper -...

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Week 6 – Credit Policy Decisions FIN200  Cooper Office Supplies is considering a more liberal credit policy in order to increase sales. The  following data is available for the company:  Uncollectable New Accounts……………. .8%  Collections Cost (% of new sales)………. ..6%  Production and Selling Costs……………. .77%  Accounts Receivable Turnover……………5  Income taxes……………………………….34%  Expected increase in sales…………. .......... $78,000  a. What is the level of accounts receivable needed to support this sales expansion?  New Sales/ turnover = $78,000/5 = $15,600  b. What would be Cooper's incremental income after tax on investment?  Added Sales………………………………………. .$78,000  Accounts uncollectible (8% of new sales)…………($6,240)  Annual Incremental revenue…………………….…$71,760  Collection costs (6% of new sales)………………. ..($4,680) 
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2010-07-03_061149_Week_6-cooper -...

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