Problem:
If a company can expect an extra $2 million in sales if it enters a new market and it knows that 15% of its sales will be uncollectible, collection costs will be 2% on all new sales, and the company's production and selling costs are 80% of sales and it also has a tax rate of 30%, what will the company's net income be.
Also, if the company turns its receivables over 4 times per year, what will its additional investment in accounts receivable be and what will they earn as an after tax return on investment.
I figured the net income to be $42,000 but am confused about receivables turning over 4 times per year. Would this be 2,000,000 x 4 with a net income of $168,000??