Unformatted text preview: which is financed by a bank loan at a 6 percent annual interest rate. A large bank has approached you about setting up a nation-wide system of lock boxes which should help you to speed up collections and lower your average accounts receivable balances by 25 percent. Assuming a tax rate of 40 percent, determine how much you should be willing to pay (this would be considered an operating expense) for this system on an annual basis. A. $41,760.00 B. $37,580.00 C. $34,800.00 D. $48,720.00 E. $44,640.00 20. Your company is contemplating a change in its accounts receivable policy. Its current income statement (Year 0) is below: Income Statement Year 0 Year 1 Sales $730,000.00 Variable Costs -$584,000.00 Gross Profit $146,000.00 Fixed Costs -$46,000.00 Bad Debt Expense: Original -$14,600.00 New --- EBIT $85,400.00 Interest: Original -$15,400.00 New --- EBT $70,000.00 Taxes (40%) -$28,000.00...
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
- Spring '08