Marcos Company annual sales are $730 million. Suppose Marcos can reduce the time required to process customer payments by 3 days through more efficient payment processing techniques. Given that any funds released by these methods can be invested elsewhere in the company to yield a 15% pretax rate of return, determine the annual increase in pretax returns. (Assume 365 days per year in all calculations.)

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Quizplus · Accepted Answer

The annual increase in pretax returns can be calculated by first determining the daily sales (annual sales divided by 365 days), then multiplying the result by the number of days reduced (3 days) and the pretax rate of return (15%). Calculation: ($730,000,000 / 365) * 3 * 0.15 = $900,000.

Marcos Company Annual Sales Are $730 Million