lease answer question 3 I have been asking for hours to get question 3 solve. my questions are using up and I am not getting the solutions I want. i
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
lease answer question 3
I have been asking for hours to get question 3 solve. my questions are using up and I am not getting the solutions I want. i am not pleased with that. i will like to have question 3 answered.
3) Briefly explain sensitivity analysis/cost-volume-profit analysis using the solutions received from the questions above?
Caribo produces and markets wheelbarrows for the Caribbean market.
The following are estimates relating to its 2019 budget:
Selling Price---------------------------------$1000
Variable cost per wheelbarrow------------$500
Fixed annual cost----------------------------$150000
Nett Profit (After tax)-----------------------$300000
Income tax rate-------------------------------25%
The mid-year review of the income statement revealed that sales were not at the expected level.
For the six months of the year to June 2019, 350 units were sold at the estimated selling price
with variable cost as planned. However, the net profit projection for 2019 would not be
achieved unless management decisions are made. The following mutually exclusive
alternatives were presented to management:
a) The selling price should be reduced by $100. This reduction in selling price will allow
1000 units to be sold for the balance of the year. The budgeted fixed cost and variable
cost per unit will remain unchanged.
b) The variable cost per unit will be reduced by $25 by sourcing less expensive direct
material. Also, the selling price will be reduced by $150 and the expected sales for the
balance of the year is 1200 units.
c) The fixed cost would be reduced by$15000 and the selling price by 5%. Variable cost
will remain unchanged and 1100 units are expected to be sold for the balance of the
year.
Required:
1) Assume that no changes are made to the selling price or costs, calculate the amount of units
that Caribo must sell:
i) To breakeven
ii) To attain the estimated net profit
2) Determine the alternative that Caribo should select to achieve its Net profit goal.
3) Briefly explain sensitivity analysis/cost-volume-profit analysis using the solutions received from the questions above?
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