A firm with a current return on net operating assets of 15 percent anticipates growth insalesof6 percent per year from its current net operating asset base of $498 million. It also anticipates that sales will deliver 7.5 percent after-tax profit margins and an RNOA of 15 percent on a consistent basis.

a. Value the operations of this firm for a required return on operations of 11 percent.

b. The marketing team believes that if it can structure extended delayed-payment terms with customers, it can increase the sales growth rate to 6.25 percent per year, with no change in profit margins. The effect of the increased receivables would be to reduce the asset turnover ratio to 1.9. Should the marketing plan be adopted?