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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Mountain Home Systems, Inc. is a well-known and reputable supplier of integrated circuits toÂ
manufacturers of telecommunications devices. The firm is currently debating whether to expandÂ
its sales to car-telephone manufacturers. While the firm expects an extra $2 million in sales if itÂ
enters this market, it also knows that 15% of its sales will ultimately be uncollectible. In addition,Â
collection costs will be 2% on all new sales and the firm's production and selling costs are 80%Â
of sales. Mountain Home's tax rate is 30%.Â
a) Calculate Mountain Home's additional net income.Â
b) If Mountain Home can turn its receivables over 4 times per year, what will its additionalÂ
investment in accounts receivable be and what will the firm earn as an after-tax returnÂ
on that investment?Â
c) Mountain Home management requires that any new project earn a minimum of 15%Â
return on investment. Should the firm enter the car-telephone manufacturer
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