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Collins Office Supplies is considering a more liberal credit

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Collins 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 7%
Collection costs (% of new sales) 6% Production and selling costs 79%
Accounts receivable turnover 6
Income taxes 34% Expected increase in sales $75,000 due to the liberal credit policy a.What is the level of accounts receivable needed to support this sales expansion? b.What would be Collins' incremental after tax return on investment? c.Should Collins liberalize credit if a 15% after tax return on investment is required? Assume Collings also needs to increase its level of inventory to support new sales and that inventory turnover is 4 times. d.What would be the total incremental investment in accounts receivable and inventory to support the expected increase in sales? e.Given the income determined in partD,should Collin extend more liberal credit terms?
Submitted: 7 years ago.
Category: Homework
Expert:  SteveS replied 7 years ago.

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Expert:  SteveS replied 7 years ago.

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