4-b. Assume the president expects this year's unit sales to increase by 17%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year? 5. The sales manager is convinced a 11% reduction in the selling price, combined with a $70,000 increase in advertising, would increase this year's unit sales by 25%. a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented? b. If the sales manager's ideas are implemented, how much will net operating income increase or decrease over last year? 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.10 per unit. He thinks this move, combined with some increase in advertising, would increase this year's unit sales by 25%. How much could the president increase this year's advertising expense and still earn the same $1,360,000 net operating income as last year?

4-b. Assume the president expects this year's unit sales to increase by 17%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year? 5. The sales manager is convinced a 11% reduction in the selling price, combined with a $70,000 increase in advertising, would increase this year's unit sales by 25%. a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented? b. If the sales manager's ideas are implemented, how much will net operating income increase or decrease over last year? 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.10 per unit. He thinks this move, combined with some increase in advertising, would increase this year's unit sales by 25%. How much could the president increase this year's advertising expense and still earn the same $1,360,000 net operating income as last year?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Creative Analysis, Inc. is currently operating at maximum capacity. Assume that all costs and net working capital vary directly with sales. The dividend payout ratio will remain constant. How much is the External Financing needed (EFN) if sales are projected to increase by 10%? Income Statement end of last year: Sales $8,500 Costs $7,960 Net Income $540 Dividends paid = $324 Balance Sheet as of end of last year: Cash Accounts Receivables Inventory Net Fixed Assets Total assets -$25.1 $156.1 O $296.5 -$67.6 O $274.9 Assets $1,600 $975 $2,425 $2,200 $7,200 Accounts Payable Long-Term Debt Common Stock Retained Earnings Total Liabilities & Equity Liabilities & Equity $2,075 425 $3000 $1,700 $7,200
Cold Goose Metal Works Inc.’s income statement reports data for its first year of operation. The firm’s CEO would like sales to increase by 25% next year. 1. Cold Goose is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before interest and taxes (EBIT). 2. The company’s operating costs (excluding depreciation and amortization) remain at 70% of net sales, and its depreciation and amortization expenses remain constant from year to year. 3. The company’s tax rate remains constant at 25% of its pre-tax income or earnings before taxes (EBT). 4. In Year 2, Cold Goose expects to pay $200,000 and $1,922,063 of preferred and common stock dividends, respectively. Complete the Year 2 income statement data for Cold Goose, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar. Cold Goose Metal Works Inc. Income Statement for Year Ending December 31…
Assume the Hiking Shoes division of the All About Shoes Corporation had the following results last year (in thousands). Management's target rate of return is 5% and the weighted average cost of capital is 25%. Its effective tax rate is 30%. $13,000,000 1,300,000 1,500,000 Sales Operating income Total assets Current liabilities 810,000 What is the division's sales margin? O A. 10.00% O B. 54.00% O C. 866.67% O D. 86.67%
Incremental earnings: Company will spend 4.5 million on advertising for a new product. Ads will boost sales by 10.1 million first year and 8.1 million 2nd year plus increase other product sales by 2.2 million each year. The new product will have a gross profit margin of 33% and gross profit margin on existing products will increase by 20%. corporate tax rate is 25%. My Excel answer is below. Am I correct? For the TOTAL GROSS PROFIT, I added the gross profit from both the new product and existing product. Normally, I would subtract COGS from Sales It seems here it is given with the %. For TAXES, I multiplied EBIT to the 25%. For INCREMENTAL EARNINGS, I subtracted Taxes from EBIT. Incremental Earnings Forecast (in 000s) 1 2 Sales of new product 10.1 8.1 Sales of other products 2.2 2.2 Gross Profit for new product is 33% 3.33 2.67 Gross Profit for other products is 20% 0.44 0.44 Total Gross Profit 3.8 3.1 Selling, General and Administrative Expense (advertising) 4.5 0.0…
Grant Communications is forecasting its financial statements for the upcoming year. Highlights include: Current assets of $6 million Current ratio of 2.0 Sales of $20 million Inventory turnover ratio (Sales/Inventory) of 6 The company's CFO is concerned about the forecasted inventory turnover ratio. Her goal is cut inventory enough to obtain an inventory turnover ratio of X, which is the industry average, while still maintaining sales at $20 million. If the company can accomplish this goal, the cash generated from the cut in inventories will be used to cut accounts payable. This will give the firm a Quick Ratio [(Current Assets - Inventory) / Current Liabilities] of 1.50. What is X, the desired inventory turnover ratio? Enter your answer, truncated to 2 decimal places. For example, enter 7.777 as 7.77.
Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1 and by 5% in Year 2. Its operating profitability ratio (OP) is 10%, and its capital requirement ratio (CR) is 80%?a. What are the projected sales in Years 1 and 2?b. What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2? c. What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2?d. What is the projected FCF for Year 2?
The profit margin is 15% and the dividend payout is 70%. Last year sales were RO 100 million and total assets were RO 80 Million. the accounts payable represent 30% of total assets. The operating accurals are RO 2 million. The assets and costs vary directly with sales. The firm operates at full capacity. if the sales growth rate is 10% how much external financing is needed? please show all work and interpretation
A firm is considering a new inventory system that will cost $120,000. The system is expected to generate positive cash flows over the next four years in the amounts of $35,000 in year 1, $55,000 in year 2, $65,000 in year 3, and $40,000 in year 4. The firm’s required rate of return is 9%. What is the payback period of this project? 1.95 years 2.46 years 2.99 years 3.10 years Based on the information from Question 47. What is the net present value (NPV) of the project? $28,830.29 $30,929.26 $36,931.43 $39,905.28 Based on the information from Question 47, what is the internal rate of return (IRR) of this project? 14.03% 17.56% 19.26% 21.78% Based on the information from Question 47, what is the profitability index (PI) of this project? 0.87 1.11 1.31 1.83.
6. 5-23 The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1 per unit. He thinks that this move, combined with some increase in advertising, would increase this year’s sales by 25%. How much could the president increase this year’s advertising expense and still earn the same $60,000 net operating income as last year?
A firm is considering several policy changes to increase sales. It will increase inventory by $10,000 it will offer more liberal sales terms but will result in average receivables increasing by $65,000. These actions are expected to increase sales by $800,000 per year, and cost of goods will remain at 80% of sales. Because of the firm’s increased purchase of its won production needs, average payable increases by $35,000.What factors should they consider when making these decisions? What effects would they have on the firm’s cash cycle? Please select three financial ratios they should consider and why
Suppose the Board of Directors of Baldwin mandates that management take measures to increase financial leverage next year. Assuming revenue and profits remain the same, and assets are reduced by 20% through efficiency gains. What will the next year's ROE be if leverage increases by 20%? Baldwin currently ROE is 3.1 Group of answer choices A) 7.8% B) 12.9% C) 4.65% D) 10.3%
You are upgrading to better production equipment for your firm's only product. The new equipment will allow you to make more of your product in the same amount of time. Thus, you forecast that total sales will increase next year by 18% over the current amount of 96,000 units. If your sales price is $21 per unit, what are the incremental revenues next year from the upgrade? The incremental revenues are $ (Round to the nearest dollar.)