Ms. Gold is in the widget business. She currently sells 1.7 million widgets a year at $7 each. Her variable cost to produce the widgets is $5 per unit, and she has $1,680,000 in fixed costs. Her sales-to-assets ratio is seven times, and 40 percent of her assets are financed with 9 percent debt, with the balance financed by common stock at $10 par value per share. The tax rate is 40 percent. Her sister-in-law, Ms. Silverman, says Ms. Gold is doing it all wrong. By reducing her price to $6.00 a widget, she could increase her volume of units sold by 40 percent. Fixed costs would remain constant, and variable costs would remain $5 per unit. Her sales-to- assets ratio would be 8.0 times. Furthermore, she could increase her debt-to-assets ratio to 50 percent, with the balance in common stock. It is assumed that the interest rate would go up by 1 percent and the price of stock would remain constant.
Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…
A: Stock fund expected returns: 17%Standard deviation of stock: 34%Bond fund expected returns:…
Q: You run a construction firm. You have just won a contract to build a government office complex…
A: NPV means PV of net benefits which will arise from the project during the period. It is computed by…
Q: A $5000 payment due 1 1/2 years ago has not been paid. If money can earn 3.25% compounded annually,…
A: TVM is the concept that considers money's interest-earning capacity, which makes money earned…
Q: P6-20 Yield to maturity The relationship between a bond's yield to maturity and coupon rate can be…
A: Bonds refers to financial instruments issued by governments, companies, or other entities to raise…
Q: A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price…
A: The value of the forward contract 8 months later is approximately $0.91 Explanation:To calculate the…
Q: Question 3. Analysis Analyze whether Nike should go ahead with this project. You must provide an…
A: The objective of the question is to analyze whether Nike should proceed with a project based on the…
Q: OptiLux is considering Investing in an automated manufacturing system. The system requires an…
A: NPV means Net present value.It is a capital budgeting technique used for making investment…
Q: A company is launching a new sales initiative and expects sales of $598,427 during the first year.…
A: Gross profit margin is the measuring metrics that investors or company managers will use to evaluate…
Q: Two Years Future Value What is the future value of $12,000 deposited for two years earning 6%…
A: Present Value = pv = $12,000Time = t = 2 YearsInterest Rate = r = 6%
Q: should you be concerned about data security? in a recent survey _______ americans reported that they…
A: The correct answer is b) more than 75%.Explanation:Step 1: The correct answer is b) more than 75%.…
Q: A mortgage of $26, 252.00 is to be repaid by making payments of $ 1368.00 at the end of each year.…
A: The objective of the question is to find out the term of the mortgage in years and months. The…
Q: Suppose that the prices of zero-coupon bonds with various maturities are given in the following…
A: The forward rate of interest refers to the interest rate agreed upon today for a loan that will be…
Q: Saving cash in the bank is not as attractive as it was in the past, and RBL is looking to invest…
A: A portfolio is a collection of different securities that depends upon the objective of the…
Q: Congratulations, you've just won the $3,800,000 state lottery! The lottery commission offers you the…
A: Here,AnnuityPayment is $173,000Interest Rat (r) is 15.00%Time Period (n) is 25 yearsLump-sum Pyamnet…
Q: Antonio would like to replace his golf clubs with a custom-measured set. A local sporting goods…
A: The objective of the question is to determine whether Antonio should cash in his Certificate of…
Q: Problem 2-22 Calculating Cash Flow Use the following information for Ingersoll, Incorporated. Assume…
A: Cash flow to creditors shows the cash moving between a company and its lenders, including interest…
Q: 5. Recalculate the NPV using a 8 percent discount rate. (Future Value of $1. Present Value of $1.…
A: The net present value measures the current value of an investment's projected cash flows against the…
Q: Use the data below to construct the Arms ratio on each of the five trading days. Note: Do not round…
A: Arms ratio- This ratio indicates the relationship between advancing stocks and declining stocks,…
Q: What APR rate of interest is required to make your initial deposit of $3,813 grow to $7,006 in 15…
A: The time value of money is a concept in finance that recognizes the idea that money's worth changes…
Q: You deposited $250 in the bank for 5 years at 12%. If interest is added at the end of the year, how…
A: The time value of money (TVM) is a fundamental concept in finance that recognizes the principle that…
Q: A 20-year, $1,000 par value bond has a 9.5% yield to maturity. The bond currently sells for $867.81.…
A: Bond valuation is the foundation of the question and is a key idea in finance. Bond valuation is…
Q: Annual and Average Returns for Stocks, Bonds, and T-Bills, 1950 to 2017 1950 to 2019 Average 1950 to…
A: Portfolio return:Portfolio return is an important term in the world of finance and investing. It…
Q: Stock XYZ started at $415. It went up to $500. What is the percent increase or decrease (relative…
A: Since the price of the stock has been increased hence we will calculate the percentage…
Q: How can finance helps mitigate potential threats to the success of strategic plans?
A: In order to mitigate potential threats to the success of strategic initiatives, finance plays a…
Q: A stock is currently priced at $35 and will move up by a factor of 1.18 or down by a factor of .85…
A: Stock price = $35Up-move factor = 1.18Down factor = 0.85Risk free rate = 3%Strike price = $40To…
Q: Let S = $100, K = $95, \sigma = 30%, r = 8%, T = 1, and \delta = 0. For simplicity, let u = 1.3, d =…
A: The topic at hand concerns the application of the binomial option pricing model in the context of…
Q: Ultra Air's bonds have a 11-year maturity, a 10% coupon, paid semiannually, and a par value of…
A: A bond is an instrument that represents the loan that is made by the investor to the company and…
Q: Apple stock is currently selling for $45.00 per share. The stock has a constant growth rate of…
A: Dividend per share refers to the income attributable to the outstanding shareholders which is…
Q: Use the following information for Ingersoll, Incorporated. Assume the tax rate is 23 percent. Sales…
A: Cash flow:Cashflow is the vital circulatory system that fuels the operational engine of any…
Q: a. Using the IRR formula in the textbook and what is the present value factor for this investment?…
A: The internal rate of return is used to evaluate an investment's profitability by calculating the…
Q: The Campbell Company is considering adding a robotic paint sprayer to its production line. The…
A: Solution:a. Net Cash Flow for Year 0:The sprayer's starting price is $960,000.Cost of installation:…
Q: Hedging is matching the maturities of assets and liabilities to reduce risk.Hedging is matching the…
A: Given StatementHedging matches the maturities of assets and liabilities to reduce risk.What is…
Q: Liam just graduated from his state university with $29 comma 50229,502 in student loan debt. He is…
A: Loan payments are monthly installments made by a borrower to repay the amount borrowed from a…
Q: I NEED FORMULAS FOR EXCEL PLZ ANSWER ALL PARTS
A: The objective of the question is to prepare an amortization schedule for a five-year loan of $67,500…
Q: Find expected return with beta if -0.8, if risk free rate is 3.4% and expected return on market is…
A: The expected return of the asset with a beta of -0.8 is -3.72%. This indicates that the asset is…
Q: You have 20 years left for your retirement. You wish to accumulate a sum large enough by that time…
A: The objective of the question is to calculate the monthly savings required to accumulate a…
Q: Firm A is planning on merging with Firm B. Firm A will pay Firm B's stockholders the current value…
A: To find the value per share of the merged firm, we need to calculate the total value of both firms…
Q: A firm issues preferred stock that has $70 par value abs pays a 15% annual dividend each year. Firms…
A: Given information:Par value (P) = $70Annual dividend (D) = 15%Market price (after flotation cost)…
Q: What is the present value (PV) of an investment that pays $200,000 every year (end - of - every…
A: Here,AnnuityPayment is $200,000Interest Rate is 5%Compounding Period is Quarterly i.eTime Period of…
Q: You are interested in investing your money in a bank account which of the following banks provides…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: For the given cash flows, suppose the firm uses the NPV decision rule. Year 0 1 2 3 Cash Flow…
A: NPV, or Net Present Value, is a capital budgeting technique used to assess the feasibility of a…
Q: How does finance helps translate strategic objectives into actionable plans?
A: “Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: Blinding Light Company has a project available with the following cash flows: Year Cash Flow 0 1 2 3…
A: Internal rate of return refers to the minimum return that is earned by the investors over the…
Q: Problem 7-21 Compute Bond Price (LG7-4) Compute the price of a 5.8 percent coupon bond with 10 years…
A: Here,CouponRate is 5.8%Time to Maturity is 10 yearsYield to Maturity is 9.4%Frequency of Coupon…
Q: A $50,000, 8% bond with semi-annual coupons is purchased three years before maturity. Calculate the…
A: GivenFace value of bond = $50,000coupon rate = 8% p.a. (semi annual 4%)Time to maturity(n) = 3…
Q: An investment project costs $16,800 and has annual cash flows of $4,100 for six years. a. What is…
A: Discounted payback period is a method used to identify the time it takes to recover the initial…
Q: Assume a variable rate mortgage of 500,000 with j12= 4%, amortized over 25 years with monthly…
A: Refinancing cost refers to the expenses associated with refinancing a loan. When you refinance, you…
Q: Problem 5-3 Compound Interest (LO1) Suppose that the value of an investment in the stock market has…
A: Interest rate5%Number of years between 1909 and 2020111Amount invested in 1909$1,000.00FV of…
Q: Suppose that there are two independent economic factors, F₁ and F2. The risk-free rate is 10%, and…
A: The multi-factor model, commonly referred to as Arbitrage Pricing Theory (APT) or the Capital Asset…
Q: Each of the four independent situations below describes a finance lease in which annual lease…
A: A lease is defined as a contractual agreement incorporated between two business entities where one…
Vijay
Step by step
Solved in 3 steps with 2 images
- Check my work 6. Mr. Gold is in the widget business. He currently sells 1.5 million widgets a year at $6 each. His variable cost to produce the widgets is $4 per unit, and he has $1,550,000 in fixed costs. His sales-to-assets ratio is six times, and 30 percent of his assets are financed with 10 percent debt, with the balance financed by common stock at $10 par value per share. The tax rate is 35 percent. 1.42 His brother-in-law, Mr. Silverman, says Mr. Gold is doing it all wrong. By reducing his price to $5.00 a widget, he could increase his volume of units sold by 60 percent. Fixed costs would remain constant, and variable costs would remain $4 per unit. His sales-to- assets ratio would be 7.5 times. Furthermore, he could increase his debt-to-assets ratio to 50 percent, with the balance in common stock. It is assumed that the interest rate would go up by 1 percent and the price of stock would remain constant. points eBookChapter: Cost Volume Profit (CVP) Analysis Q) Chaudhary Group Ltd manufactures premium high definition televisions. The firm’s fixed costs are $4,000,000 per year. The variable cost of each TV is $2,000, and the TVs are sold for $3,000 each. The company sold 5,000 TVs during the previous year. (In the following requirements, ignore income taxes) Required: Treat each of the requirements as independent situations:a) Calculate the break-even point in units. b) What will the new break-even point be if fixed costs increase by 10 per cent? c) What was the company’s net profit for the previous year? d) The sales manager believes that a reduction in the sales price to $2,500 will result in orders for 1,200 more TVs each year. What will the break-even point be if the price is changed?Jacob Arrell Corporation has sales revenue of $9,500,000. The company's fixed costs total $5.000.000, its variable costs are 15 percent of sales, and its interest expense is $1,000,000. If the company wants to increase its EPS by 30%, how much will it need to increase its Sales? a. 20.24 percent b. 7.71 percent c. 11.42 percent d. 48.19 percent e. 16.75 percent FOT
- TOPIC 3: LEVERAGE & CAPITAL STRUCTURE FANSA manufactures high quality zippers for designer handbags and luggage. The wholesale price of each zip is $5.00, the operating cost per zip is $2.80, while total fixed operating costs are $40,000 per year. FANSA pays $10,400 interest and preferred dividends of $6,000 per year. The company currently sells 35,000 zippers per year and is taxed at a rate of 30%. a. Calculate FANSA’s operating breakeven point. b. On the basis of the firm’s current sales of 35,000 units per year and its interest and preferred dividend costs, calculate its Earnings Before Interest and Taxes (EBIT) and Earnings Available for Common Stockholders (EACS).EX6-1: Bottom-up Pricing You own a 132-seat restaurant, which opens 6 days a week for 52 weeks of the year. The seat turnover per day is 2.2. You have the following projections about the costs for next year. You require an ROE of 18% on your $240,000 in a restaurant Tax rate: 28% Furniture & Equipment: Book value = $112,000, Depreciation - 20% per year Bank loan: Balance owed: $50,000, interest rate: 12% Insurance: $4,500 Licenses: $3,200 Maintenance: $1,200 Salary: $48,900 Cost of sales (food & beverage): 35% of sales revenue Wage: 33% of sales revenue Other variable costs: 8% of sales revenue Utilities: $12,600 Calculate the sales revenue and average check required to cover all restaurants expenses and profits for the next year. *Show your work in the cells for full credits. Revenue Variable cost Contribution margin - Fixed cost Operating income. - Tax38 Slosh Cleaning Corporation services both residential and commercial customers. Slosh expects the following operating results next year for each type of customer: Residential Commercial Sales P60,000 P140,000Contribution margin ratio 50% 30% Slosh expects to have P50,000 in fixed expenses next year. What would Slosh's peso sales revenues from Commercial customers have to be next year in order to generate a profit of P166,000?
- 6.60 O 3.00 O Atlas Company has a monthly target operating income of $24,000. Variable expenses are 60% of sales and monthly fixed expenses are $18,000. What is ?John's operating leverage factor at the target level of operating income 1.75 O 1.35 2.00 1.57 O 1.43 O Lowwater Sailmakers manufactures sails for sailboats. The company has the capacity to produce 25,000 sails per year, but is currently producing and selling 20.000 sils per year. The following information relates to current production. If a special sales order is accepted for 4.000 sails at a price of hp HEWLETT-PACKARDexcel break even point 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 $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 investment and $360,000 to fixed operating costs. This change will (1) reduce variable costs per unit by $12,000 and (2) increase output by 23 units, but (3) the sales price on all units will have to be lowered to $84,000 to permit sales of the additional output. The firm has tax loss carry forwards that render its tax rate zero,10 Slosh Cleaning Corporation services both residential and commercial customers. Slosh expects the following operating results next year for each type of customer: Residential Commercial Sales P60,000 P140,000 Contribution margin ratio 50% 30%Slosh expects to have P50,000 in fixed expenses next year. What would Slosh's peso sales revenues from Commercial customers have to be next year in order to generate a profit of P166,000? Group of answer choices P600,000 P432,000 P210,000 P500,000 P420,000 P300,000 P216,000 P540,000
- ok " t 0 inces Baird Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The company's chief accountant recently prepared the following income statement showing annual revenues and expenses associated with the segment's operating activities. The relevant range for the production and sale of the calculators is between 32,000 and 66,000 units per year. Revenue (40,eee units $11.00) Unit-level variable costs Materials cost (40,000 $3.00) x Labor cost (40,000 × $2.00) Manufacturing overhead (40,000 x $0.50) Shipping and handling (40,000 × $0.32) Sales commissions (40,000 × $2.00) Contribution margin Fixed expenses Advertising costs Salary of production supervisor Allocated companywide facility-level expenses Net loss Complete this question by entering your answers in the tabs below. Req A Required a. A large discount store has approached the owner of Baird about buying 9,000 calculators. It would…A firm sells 500,000 widgets at $40 each, the cost of the widgets is $25 each, expected general and administrative expenses are 20% of sales, the firm has $2,000,000 of debt at a rate of 5%, and taxes are 35%. Calculate the firm's earnings after taxes? O $1,560,000 O $1,750,000 O $2,210,000 O $2,100,000Break-Even Point Schweser Satellites Inc. produces satellite earth stations that sell for $105,000 each. The firm's fixed costs, F, are $3 million, 50 earth stations are produced and sold each year, profits total $600,000, 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 assets and $500,000 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 be lowered to $95,000 to permit sales of the additional output. The firm has tax loss carryforwards that render its tax rate zero, its cost of equity is 16%, 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. $ 925000 To get a rough idea of the project's profitability, what is the project's expected…