Question

Global Services is considering a promotional campaign that wil increase annual credit sales by $510,000. The company will require investments in accounts receivable, inventory, and plant and equipment. The turnover for each is as follows: Accounts receivable 5 times 6 times 3 times Inventory Plant and equipment All $510,000 of the sales will be collectible. However, collection costs will be 2 percent of sales, and production and selling costs will be 71 percent of sales. The cost to carry inventory will be 6 percent of inventory Depreciation expense on plant and equipment will be 20 percent of plant and equipment. The tax rate is 25 percent. a. Compute the investments in accounts receivable, inventory, and plant and equipment based on the tunover ratios. Add the three together. Answer is complete and correct. Accounts receivable Inventory Plant and equipment Total Investment S 357,000 02,000 85,000 170,000 b. Compute the accounts receivable collection costs and production and selling costs and then add the two figures together Answer is complete but not entirely correct. Collection cost 2,040)
Help with the red x’s please

Answer 1

B)

Particulars	Amount
Collection cost	10200
Production and selling cost	362100
Total	372300

D)

Particulars	Amount
Collection cost	10200
Production and selling cost	362100
Cost of carrying	5100
Depreciation	34000
Total cost	411400

F)

Particular	Amount
Total cost	411400
Revenue	510000
Profit	98600
Tax	24650
Income/profit after tax	73950

g-1)

After-tax rate of return = (73950/510000)*100 = 14.5%