Don't used Ai solution Break-Even PointSchweser Satellites Inc. produces satellite earth stations that sell for $110,000 each. The firm's fixed costs, F, are $2 million, 50 earth stations are produced and sold each year,profits total $500,000, and the firm's assets (all equity financed) are $4 million. The firm estimates that it can change its production process, adding $3 million to assets and$400,000 to fixed operating costs. This change will reduce variable costs per unit by $9,000 and increase output by 20 units. However, the sales price on all units must belowered to $100,000 to permit sales of the additional output. The firm has tax loss carryforwards that render its tax rate zero, its cost of equity is 12%, and it uses no debt.a. What is the incremental profit? Enter your answer in dollars. For example, an answer of $4 million should be entered as 4,000,000, not 4. Round your answer to the nearestdollar.$×To get a rough idea of the project's profitability, what is the project's expected rate of return for the next year (defined as the incremental profit divided by the investment)?Round your answer to two decimal places..%

Given Data:Current Scenario:Selling price per unit = $110,000Fixed costs (F) = $2,000,000Units sold…

Answered: Break-Even Point Schweser Satellites…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter12: Balanced Scorecard And Other Performance Measures

Section: Chapter Questions

Problem 4PB: Banyan Industries has two divisions, a tax rate of 30%, and a minimum rate of return of 20%....

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Banyan Industries has two divisions, a tax rate of 30%, and a minimum rate of return of 20%. Division A has a weighted average cost of Capital of 9.5% and is looking at a new project that will generate a profit of $1,200,000 from a machine that costs $4,000,000. Division B has a weighted average cost of capital of 9.5% and is looking at a new project that will generate a profit of $1,350,000 from a machine that costs $5,000.000. A. Calculate the EVA for each of Banyans divisions. B. Calculate the RI for each of Banyans division. C. If Banyan uses EVA to evaluate the projects, which division has the better project and by how much? D. If Banyan uses RI, which division has the better project and by how much? E. What are some of the reasons for the similarity or difference that you found in the use of EVA versus RI?
Schweser satellites Inc. produces satellite earth stations that sell for $100,000 each. The firm's fixed cost, F, are $2 million, 50 earth stations are produced and sold each year, profits total $500,000, and the firm's assets (all equity financed) are $5 million. The firm estimates that it can change its production process, adding $4 million to investment and $500,000 to fixed operating costs. This change will: 1. reduce the variable costs per unit by $10,000 and 2. increase output by 20 units, but 3. the sales price on all units will have to be lowered to $95,000 to permit sales of the additional output. The firm has tax loss carryforwards that renders its tax rate 0, its cost of equity is 16%, and it uses no debt. what is the incremental profit? What is the project’s expected return next year? should the firm make the investment? Would the firm break-even point increase or decrease if it mane the change Would the new situation expose the firm to more or less business risk than the…
Gamut Satellite Inc. produces satellite earth stations that sell for $150,000 each. The firm’s fixed costs, F, are $1.5 million, 20 earth stations are produced and sold each year, profits total $400,000, and the firm’s assets (all equity financed) are $5 million. The firm estimates that it can change its production process, adding $10 million to assets and $500,000 to fixed operating costs. This change will reduce variable costs per unit by $5,000 and increase output by 30 units. However, the sales price on all units must be lowered to $140,000 to permit sales of the additional output. The firm has tax loss carryforwards that render its tax rate zero, its cost of equity is 18%, and it uses no debt. Would the new situation expose the firm to more or less business risk than the old one? Show workings
Gamut Satellite Inc. produces satellite earth stations that sell for $150,000 each. The firm’s fixed costs, F, are $1.5 million, 20 earth stations are produced and sold each year, profits total $400,000, and the firm’s assets (all equity financed) are $5 million. The firm estimates that it can change its production process, adding $10 million to assets and $500,000 to fixed operating costs. This change will reduce variable costs per unit by $5,000 and increase output by 30 units. However, the sales price on all units must be lowered to $140,000 to permit sales of the additional output. The firm has tax loss carryforwards that render its tax rate zero, its cost of equity is 18%, and it uses no debt. Determine the variable cost per unit Determine the new profit if the change is made What is the incremental profit?
Gamut Satellite Inc. produces satellite earth stations that sell for $150,000 each. The firm’s fixed costs, F, are $1.5 million, 20 earth stations are produced and sold each year, profits total $400,000, and the firm’s assets (all equity financed) are $5 million. The firm estimates that it can change its production process, adding $10 million to assets and $500,000 to fixed operating costs. This change will reduce variable costs per unit by $5,000 and increase output by 30 units. However, the sales price on all units must be lowered to $140,000 to permit sales of the additional output. The firm has tax loss carryforwards that render its tax rate zero, its cost of equity is 18%, and it uses no debt. What is the projects expected rate of return for the next year (defined as the incremental profit divided by the investment)? Should the firm make the investment? Why or why not? Would the firm’s break-even point increase or decrease if it made the change?
Schweser Satellites Inc. produces satellite earth stations that sell for $95,000 each. The firm's fixed costs, F, are $2 million, 50 earth stations are produced and sold each year, profits total $500,000; and the firm's assets (all equity financed) are $6 million. The firm estimates that it can change its production process, adding $3.5 million to investment and $320,000 to fixed operating costs. This change will (1) reduce variable costs per unit by $8,000 and (2) increase output by 19 units, but (3) the sales price on all units will have to be lowered to $87,000 to permit sales of the additional output. The firm has tax loss carry forwards that render its tax rate zero, its cost of equity is 16%, and it uses 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. ▬▬▬▬▬ Open spreadsheet a. What is the incremental profit? $ To get a rough idea of the project's profitability,…
Schweser Satellites Inc. produces satellite earth stations that sell for $100,000 each. The firm's fixed costs, F, are $3 million, 50 earth stations are produced and sold each year, profits total $400,000, and the firm's assets (all equity financed) are $4 million. The firm estimates that it can change its production process, adding $3 million to assets and $500,000 to fixed operating costs. This change will reduce variable costs per unit by $12,000 and increase output by 25 units. However, the sales price on all units must be lowered to $90,000 to permit sales of the additional output. The firm has tax loss carryforwards that render its tax rate zero, its cost of equity is 17%, and it uses no debt. a. What is the incremental profit? Enter your answer in dollars. For example, an answer of $4 million should be entered as 4,000,000, not 4. Round your answer to the nearest dollar. $ To get a rough idea of the project's profitability, what is the project's expected rate of return for the…
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Hit or Miss Sports is introducing a new product this year. If its see-at-night soccer balls are a hit, the firm expects to be able to sell 42,700 units a year at a price of $64 each. If the new product is a bust, only 22,200 units can be sold at a price of $41. The variable cost of each ball is $27 and fixed costs are zero. The cost of the manufacturing equipment is $5.92 million, and the project life is estimated at 9 years. The firm will use straight-line depreciation over the 9-year life of the project. The firm's tax rate is 35% and the discount rate is 13%. Now suppose that Hit or Miss Sports can expand production if the project is successful. By paying its workers overtime, it can increase production by 20,100 units; the variable cost of each ball will be higher, equal to $32 per unit. By how much does this option to expand production increase the NPV of the project? Assume that the firm decides whether to expand production after it learns the first-year sales results. (Round…
Hit or Miss Sports is introducing a new product this year. If its see-at-night soccer balls are a hit, the firm expects to be able to sell 42,800 units a year at a price of $70 each. If the new product is a bust, only 20,700 units can be sold at a price of $45. The variable cost of each ball is $26 and fixed costs are zero. The cost of the manufacturing equipment is $5.86 million, and the project life is estimated at 10 years. The firm will use straight-line depreciation over the 10-year life of the project. The firm's tax rate is 35% and the discount rate is 14%. a. If each outcome is equally likely, what is the expected NPV? ( Use the minus sign for negative value. Round your answer to the nearest dollar.) NPV $ Will the firm accept the project? The firm will (Click to select) v the project. b. Suppose now that the firm can abandon the project and sell off the manufacturing equipment for $5.2 million if demand for the balls turns out to be weak. The firm will make the decision to…
Wilson Partners manufactures thermocouples for electronics applications. The current system has a fixed cost of $300,000 per year, has a variable cost of $10 per unit, and sells for $14 per unit. A newly proposed process will add on-board features that allow the revenue to increase to $16 per unit, but the fixed cost will now be $500,000 per year. The variable cost will be based on a $48 per hour rate with 0.2 hour dedicated to produce each unit. Determine the annual breakeven quantity for the (a) Current system and (b) the new system. (b) Plot the two profit relations and estimate graphically the breakeven quantity between the two alternatives. (c) Mathematically determine the breakeven quantity between the two alternatives and compare it with the graphical estimate
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $1,810,000 and will last for 4 years. Variable costs are 37 percent of sales, and fixed costs are $179,000 per year. Machine B costs $4,730,000 and will last for 8 years. Variable costs for this machine are 32 percent of sales and fixed costs are $117,000 per year. The sales for each machine will be $9.46 million per year. The required return is 10 percent and the tax rate is 21 percent. Both machines will be depreciated on a straight-line basis. If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine A? EAC If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine B? EAC

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