Problem 7-7 Your banker has analyzed your company account and has suggested that her bank has...

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Problem 7-7 Your banker has analyzed your company account and has suggested that her bank has a cash management package for you. She suggests that with a concentration banking system, your float can be reduced by four days on average. You, of course, are delighted (you're not sure why), but you do know your average daily collections amount to $375,000. Your opportunity cost of funds is 8 percent. The bank provides this service for $59,500 plus a compensating balance in your current account of $82,000. (A compensating balance is the amount you are required to maintain interest free at that bank.) a. Is this package worth it? O Yes O No b. By how much? (Negative answer should be indicated by a minus sign.) Annual Saving $ Problem 7-21 Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $180,000 if credit is extended to these new customers. Of the new accounts receivable generated, 6 percent will prove to be uncollectible. Additional collection costs will be 6 percent of sales, and production and selling costs will be 75 percent of sales. a. Compute the incremental income before taxes. Incremental income before taxes b. What will the firm's incremental return on sales be if these new credit customers are accepted? (Round the final answer to 2 decimal place.) Incremental return on sales c. If the receivable turnover ratio is 4 to 1, and no other asset buildup is needed to serve the new customers, what will Johnson Electronics' incremental return on new average investment be? (Do round intermediate calculations. Round the final answer to the nearest whole percentage.) Incremental return on new average Investment Problem 7-39 Fisk Corporation is trying to improve its inventory control system and has installed an online system at its retail stores. Fisk anticipates sales of 58,800 units per year, an ordering cost of $4 per order, and carrying costs of $1.5 per unit. a. What is the economic ordering quantity? Economic ordering quantity (EOQ) units b. How many orders will be placed during the year? Number of orders c. What will the average inventory be? Average inventory units d. What is the total cost of inventory expected to be? Total costs Problem 7-7 Your banker has analyzed your company account and has suggested that her bank has a cash management package for you. She suggests that with a concentration banking system, your float can be reduced by four days on average. You, of course, are delighted (you're not sure why), but you do know your average daily collections amount to $375,000. Your opportunity cost of funds is 8 percent. The bank provides this service for $59,500 plus a compensating balance in your current account of $82,000. (A compensating balance is the amount you are required to maintain interest free at that bank.) a. Is this package worth it? O Yes O No b. By how much? (Negative answer should be indicated by a minus sign.) Annual Saving $ Problem 7-21 Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $180,000 if credit is extended to these new customers. Of the new accounts receivable generated, 6 percent will prove to be uncollectible. Additional collection costs will be 6 percent of sales, and production and selling costs will be 75 percent of sales. a. Compute the incremental income before taxes. Incremental income before taxes b. What will the firm's incremental return on sales be if these new credit customers are accepted? (Round the final answer to 2 decimal place.) Incremental return on sales c. If the receivable turnover ratio is 4 to 1, and no other asset buildup is needed to serve the new customers, what will Johnson Electronics' incremental return on new average investment be? (Do round intermediate calculations. Round the final answer to the nearest whole percentage.) Incremental return on new average Investment Problem 7-39 Fisk Corporation is trying to improve its inventory control system and has installed an online system at its retail stores. Fisk anticipates sales of 58,800 units per year, an ordering cost of $4 per order, and carrying costs of $1.5 per unit. a. What is the economic ordering quantity? Economic ordering quantity (EOQ) units b. How many orders will be placed during the year? Number of orders c. What will the average inventory be? Average inventory units d. What is the total cost of inventory expected to be? Total costs