Olivarez Co. is a highly successful supplier of leather to manufacturers of leather goods. Olivarez is...

 

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Olivarez Co. is a highly successful supplier of leather to manufacturers of leather goods. Olivarez is considering expanding into the U.S. luxury auto seat market. It is estimated that although selling leather to U.S. auto manufacturers will bring additional annual sales of $700,000, a high 12% of those accounts will be uncollectible. The cost of conditioning and selling the leather is 70% of sales. olivarez 's tax rate is 46%. a) Calculate Olivarez 's incremental net income on the new sales. b) Assume Olivarez has a receivables turnover of 5. Calculate Olivarez 's incremental accounts receivable investment and after-tax return on that investment. c) Olivarez 's minimum required ROI is 15%. Should Olivarez expand into the auto market? Olivarez Co. is a highly successful supplier of leather to manufacturers of leather goods. Olivarez is considering expanding into the U.S. luxury auto seat market. It is estimated that although selling leather to U.S. auto manufacturers will bring additional annual sales of $700,000, a high 12% of those accounts will be uncollectible. The cost of conditioning and selling the leather is 70% of sales. olivarez 's tax rate is 46%. a) Calculate Olivarez 's incremental net income on the new sales. b) Assume Olivarez has a receivables turnover of 5. Calculate Olivarez 's incremental accounts receivable investment and after-tax return on that investment. c) Olivarez 's minimum required ROI is 15%. Should Olivarez expand into the auto market?

Answer rating: 100% (QA)

a Particulars Amount Annual Sales 700000 Less Other exp... View the full answer