A Chief Executive Officer (CEO) was hired just prior to the commencement of operations. After examining the projections for the first year, the CEO presented the following suggestions and revised projected income statement to the board of directors at their meeting at the beginning of the year.
1. Decrease research and development expenditures from $60 million to $25 million.
2. Increase the estimated lives of the computer equipment from 3 years to 6 years which will decrease depreciation expense from $50 million to $25 million.
3. Reduce the allowance for doubtful accounts from 10% of accounts receivable to 5% of accounts receivable.
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