provide Correct answer with calculation Given the soaring price of gasoline, Ford is considering introducing a newproduction line of gas-electric hybrid sedans. The expected annual unit salesof the hybrid cars is 31,000; the price is $25,000 per car. Variable costs ofproduction are $11,000 per car. The fixed overhead including salary of topexecutives is $80 million per year. However, the introduction of the hybridsedan will decrease Ford s sales of regular sedans by 10,000 cars per year;the regular sedans have a unit price of $20,000, a unit variable cost of$12,000, and fixed costs of $250,000 per year. Depreciation costs of theproduction plant are $50,000 per year. The marginal tax rate is 40 percent.What is the incremental annual cash flow from operations? (Round answerto the nearest whole dollar, e.g. 5,275.)

Answers: Additional revenue from hybrid sedans: 31,000 cars * $25,000 per car = $775,000,000Decrease…

Answered: Given the soaring price of gasoline,…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 4P

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Given the soaring price of gasoline, Ford is considering introducing a new production line of gas-electric hybrid sedans. The expected annual unit sales of the hybrid cars is 31,000; the price is $25,000 per car. Variable costs of production are $11,000 per car. The fixed overhead including salary of top executives is $80 million per year. However, the introduction of the hybrid sedan will decrease Ford s sales of regular sedans by 10,000 cars per year; the regular sedans have a unit price of $20,000, a unit variable cost of $12,000, and fixed costs of $250,000 per year. Depreciation costs of the production plant are $50,000 per year. The marginal tax rate is 40 percent. What is the incremental annual cash flow from operations? (Round answer to the nearest whole dollar, e.g. 5,275.)
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Current Attempt in Progress Given the soaring price of gasoline, Ford is considering introducing a new production line of gas-electric hybrid sedans. The expected annual unit sales of the hybrid cars is 35,000; the price is $25,000 per car. Variable costs of production are $13,000 per car. The fixed overhead including salary of top executives is $80 million per year. However, the introduction of the hybrid sedan will decrease Ford's sales of regular sedans by 6,000 cars per year; the regular sedans have a unit price of $20,000, a unit variable cost of $12,000, and fixed costs of $250,000 per year. Depreciation costs of the production plant are $51,000 per year. The marginal tax rate is 40 percent. What is the incremental annual cash flow from operations? Incremental annual cash flow from operations $
General Motors (GM) is considering introducing a new electric vehicle model. The fixed costs for production are estimated at $500 million per year. Variable costs are projected to be $30,000 per unit. GM expects to sell the vehicle for $45,000 per unit. The company's target profit for the first year is $200 million. Marketing research suggests a potential demand of 50,000 units in the first year. What is the break-even point in units for this new model? How many units does GM need to sell to reach its target profit? Netflix reported the following information in its 2023 annual report: total current assets of $9.8 billion, total assets of $52.3 billion, total current liabilities of $8.9 billion, and total liabilities of $28.5 billion. The company's net income for the year was $4.5 billion, and it paid dividends of $0.5 billion. At the beginning of the year, Netflix had total shareholders' equity of $19.8 billion. What was Netflix's total shareholders' equity at the end of 2023?…
Ford Motor Company is considering launching a new line of hybrid diesel-electric SUVS. The heavy advertising expenses associated with the new SUV launch would generate operating losses of $30 million next year. Without the new SUV, Ford expects to earn pretax income of $90 million from operations next year. Ford pays a 20% tax-rate on its pretax income. The amount that Ford Motor Company owes in taxes next year with the launch of the new SUV is closest to: O A. $18.0 million O B. $24.0 million O C. $6.0 million O D. $12.0 million
Honda is considering producing a new line of compact cars called the H-Mini. The new line will require an initial investment in equipment of $300 million and is expected to generate $600 million in revenues for each of the next 3 years (i.e., t=1, t=2, and t=3). The equipment will be depreciated straight-line to $0 over 3 years. Variable costs are estimated to be 70% of the H-Mini sales. Fixed costs will be $30 million a year. For marketing of the new car, Honda plans to use its existing provider, GSD&M. GSD&M has been under contract to provide all of Honda’s marketing services for the past 3 years at $50 million a year, and Honda & GSD&M agreed last month to another three year contract at the same price, independent of Honda’s decision regarding the new product line. The project will require an investment in inventory. At the beginning of the project (i.e., t=0), $50 million of inventory is required. Thereafter, inventory is projected to remain at $50 million each year…
Seattle Radiology Group plans to invest in a new CT scanner. The group estimates $1,500 net revenue per scan. Preliminary market assessments indicate that demand will be less than 5,000 scans per year. The group is considering a scanner (Scanner B) that would result in total fixed costs of $800,000 and would yield a profit of $450,000 per year at a volume of 5,000 scans. What is the estimated breakeven volume (in number of scans) for Scanner B?
Wilson Partners manufactures thermocouples for remote temperature monitoring of electronics applications. The current system has a fixed cost of $400,000 per year and a variable cost of $10 per unit. Wilson sells the units for $14 each. A newly proposed system will add on-board features that allow the revenue to increase to $16 per unit, but the fixed cost will now be $600,000 per year. The variable cost of the new system will be based on a $48 per hour rate with 0.2 hour dedicated to produce each unit Plot the two profit relations and estimate graphically the breakeven quantity between the current and proposed systems. Comment on your estimate.
Wilson Partners manufactures thermocouples for remote temperature monitoring of electronics applications. The current system has a fixed cost of $400,000 per year and a variable cost of $10 per unit. Wilson sells the units for $14 each. A newly proposed system will add on-board features that allow the revenue to increase to $16 per unit, but the fixed cost will now be $600,000 per year. The variable cost of the new system 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) proposed system.
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Amazon is considering using high capacity drones that would make its product deliveries more efficient. For this project, $116,000 would need to be spent right away to buy the required fleet of drones. The drones will be losing their economic value in equal amount each year, fully over their 6-year economic lives. Once the drones economic life is over, they would all be sold for $8,700 selling price to a new owner, and Amazon would then immediately purchase the same but brand-new drones for the same price as what it paid for the initial fleet of drones. When those drones' life is over, they would again be sold and, again, brand-new ones would be purchased - all for the same prices as for the initial drones, and so on, over and over. Additional information: . .. Amazon expects $9,300 in annual operating costs. All future cash flows are year-end cash flows. Amazon pays 21 percent tax rate on all taxable income. Amazon requires an annual discount rate of 10 percent, and the rate is not…
Chocoholics Anonymous wants to modernize its production machinery. The company's sales are $9.22 million per year, and the choice of machine won't impact that amount. The required return is 10 percent and the tax rate is 35 percent. Both machines will be depreciated on a straight-line basis. Machine Amaretto costs $1,950,000 and will last for 5 years. Variable costs are 39 percent of sales, and fixed costs are $131,000 per year. Machine Baileys costs $4,610,000 and will last for 7 years. Variable costs for this machine are 31 percent of sales and fixed costs are $103,000 per year. Required: (a)If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine Amaretto? (Do not round your intermediate calculations.) HINT: In EAC problems you first need to find the NPV. Using this NPV you can then calculate the annuity (annual cost) that has the same present value/cost. The lecture videos include a detailed example of this calculation.…

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