12-22. Besrand Boats (BB) expects this year's sales to be $150,000. BB's fixedoperating costs equal $18,000 and its variable operating costs are 80 percentof sales. BB pays $8,000 interest on its debt and its marginal tax rate is 30percent.(a) What are BB's DOL, DFL, and DTL?(b) If sales actually turn out to be $172,500, what will be BB's actual(i) EBIT and(ii) net income?

As per the given information: Expected sales - $150,000Fixed operating costs - $18,000Variable…

Answered: 12-22. Besrand Boats (BB) expects this…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Callie Corporation’s products sell for $180 each. The variable cost of each product is $135, and fixed operating costs are $371,250. Callie pays $61,875 interest on its outstanding debt each year, and its marginal tax rate is 40 percent. If Callie expects to sell 11,000 units, what is its degree of operating leverage (DOL), its degree of financial leverage (DFL), and its degree of total leverage (DTL)? The firm has no preferred stock.
The Melbo Foundation is contemplating the purchase of new equipment, which may potentially increase revenues by 25%. Currently, sales are R850,000 per year and cost of sales are 55% of sales. The equipment is expected to last for 5 years with no residual value (tax allowance granted is at 20% per year). The capex/ cost of equipment R257 500. The corporate tax rate is 28%. Calculate the estimated annual tax payment increase/decrease? R2,065 decrease R12,355 increase R12,075 decrease R2,625 increase
Sales are 150,000. COGS are 100,000. SG&A Overhead is 20,000. Depreciation is 15,000. Interest Expense is 10,000. Capital Expenditures is 15,000. Net Working Capital is not expected to rise by 1,000. The tax rate is 20%. What is FCF?
The XYZ Corporation expects to have sales of $15 million this year. Costs other than depreciation are expected to be 80% of sales, and depreciation is expected to amount to $1 million. XYZ is using $5 million debt at 10%. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. XYZ's federalolus - state tax rate is 30%. What is XYZ's expected cash flow from operations? (Assume no other changes occurred.)
The Berndt Corporation expects to have sales of $12 million. Costs other than depreciation are expected to be 60% of sales, and depreciation is expected to be $2.4 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Brendt's federal-plus-state tax rate is 40%. Berndt has no debt. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. X Open spreadsheet
A proposed new investment has projected sales of $550,000. Variable costs are 40 percent of sales, and fixed costs are $130,500; depreciation is $50,750. Prepare a pro forma income statement assuming a tax rate of 23 percent. What is the projected net income? Answer Sales Variable costs Fixed costs Depreciation EBT Taxes Net income
Xeta Inc., sells a box for $15 each. The box have a variable cost of $4 per unit, and the products' fixed operating costs are at $220,000 per year. The company's capital structure includes 55% debt and 45% equity. Annual interest expense is $25,000, and the corporate tax rate is 35%. 1.Calculate the break-even point in units. 2.If it sells 25,000 units, calculate the firm's EBIT and net income.
2. Company XYZ sells CDs. The price of its new CD is $15. Fixed costs are $1,500,000 per year. Variable costs are $9. The company expects to sell 300,000 units this year. a. How many DVDS will the company need to sell to break even? b. If the forecasts are correct, how much will company XYZ make or lose this year (before taxes)?
New equipment costs $10 million. The equipment will be depreciated straight line over 5 year to a value of zero, but in fact it will be sold after 4 years for $3,000,000. The firm's tax rate is 40%. What is the after-tax cash flow from the sale of the equipment? excel
Sunny Manufacturing is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $220,000 if credit is extended to these new customers. Of the new accounts receivable generated, 10 percent will prove to be uncollectible. Additional collection costs will be 5 percent of sales, and production and selling costs will be 70 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 Sunny Manufacturing's 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 %
Victoria Enterprises expects earnings before interest and taxes (EBIT) next year of $2.1 million. Its depreciation and capital expenditures will both be $286,000, and it expects its capital expenditures to always equal its depreciation. Its working capital will increase by $47,000 over the next year. Its tax rate is 35%. If its WACC is 10% and its FCFs are expected to increase at 5% per year in perpetuity, what is its enterprise value? The company's enterprise value is $ (Round to the nearest dollar.)

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