A company generates $5,000,000 in sales by selling 1.250,000 units at $4per unit. Its variable costs equal 75 percent of sales and its fixed costs are$750,000. Therefore, the company's operating Income (EBIT) equals$500,000. The company estimates that if its EBIT were to increase 10percent, its net income and EPS would increase 25.0 percent. How muchwill net income and EPS increase if sales increase by 10 percent?(Assume that the change in sales will have no effect on the company's taxrate.)O 67.9%O 60.1%O 70.0%O 65.3%O 62.5%

We can solve this problem with the help of following ratios :

Answered: A company generates $5,000,000 in sales…

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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Similar questions

ABC Corporation sells its product for $12 per unit. Next year, fixed expenses are expected to be $400,000 and variable expenses are expected to be $8 per unit. How many units must the company sell to generate a target profit (net operating income) of $80,000?
Last year, Bridgerton Co. had sales of $1,625,000 on the sale of 25,000 units, variable costs of $450,000 and fixed costs of $250,000. Assume a tax rate of 30%. What level of sales in units would be required to achieve an after-tax profit of $110,000 (rounded to the nearest whole number)? 4 10,664 8,663 10,263 9,264
A company requires $1400000 is sales to meet its net income target. Its contribution margin is 50% and fixed costs are $300000. What is the company's target net income?
If the objective of the firm is to get 25% profit, how many units does the firm need to sell if the price per unit is $250? Given information: Annual fixed costs are 114,000, CTO is .65, breakeven point is 175,384.62.
Boom Company has sales volume of 70,000 units with a unit selling price of $120 per unit. The variable expenses are $80 per unit, and the total fixed expenses are $2,100,000. 15. What is the degree of operating leverage? * 2.00 3.00 4.00 5.00 None of the above 16. If the sales volume increases by 15%, and all other items are the same, what will be the effect on the net operating income? * The net operating income will increase by $420,000 The net operating income will increase by $700,000 The net operating income will increase by $1,120,000 The net operating income will increase by $2,800,000 None of the above O O O
A company has set its initial selling price at $28 per unit. Its variable manufacturing costs are $10 per unit produced. Its variable selling and administrative costs are $2 per unit sold. The company’s fixed manufacturing costs are $300,000 per period and its fixed selling and administrative costs are $150,000 per period. The company’s target profit is $200,000 per period. What is the breakeven point in units? What is the breakeven point in dollars? How many units must be sold to achieve the target profit? If the fixed costs increase by 20%, how many units must be sold to achieve the target profit?
Fine Leather Enterprises sells its single product for $129.00 per unit. The firm’s fixed operating costs are $473,000 annually, and its variable operating costs are $86.00 per unit. a. Find the firm’s operating break-even point in units. b. Label the x-axis “Sales (units)” and the y-axis “Costs/Revenues ($),” and then graph the firm’s sales revenue, total operating cost, and fixed operating cost functions on these axes. In addition, label the operating break-even point and the areas of loss and profit (EBIT).

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