Phoenix TV is forecasting the following income statement:SalesOperating costs excluding depr.& amort.EBITDADepreciation & amortizationEBITInterestEBTTaxes (40%)Net income$8,000,0004,400,000$3,600,000800,000$2,800,000600,000$2,200,000800,000$1,320,000The CEO would like to see higher sales and a forecasted net income of $2,500,000. Assume thatoperating costs (excluding depreciation and amortization) are 55% of sales and that depreciation andamortization and interest expenses will increase by 10%. The tax rate, which is 40%, will remain thesame. What level of sales would generate $2,500,000 in net income?

1) Given, Net income = $2,500,000 Taxes = 40% of Earnings before tax. But we are given with net…

Answered: Phoenix TV is forecasting the following…

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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Rose Trading had RM210,000 of net profit in year 2021 when the selling price per unit was RM150, the variable costs per unit were RM90, and the fixed costs were RM570,000. Management expects per unit data and total fixed costs to remain the same in year 2022. The manager of Rose Trading is under pressure from investors to increase net profit by RM52,000 in year 2022.Required:(iii) Assume that Rose Trading sells the same number of units in year 2022 as it did in year 2021. What would the selling price have to be to reach the shareholders’ desired profit level?(iv) Assuming actual sales in year 2022 are 16,000 units with the new selling price as computed in (c), compute the margin of safety in (i) units and (ii) as a ratio. Briefly explain your findings. (Tips: Interpret about margin of safety)
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XYZ company expects in the coming year: sales of 40000 units at $10 per unit, variable operating costs of $4 per unit, fixed operating costs of $30000, interest of $50000, and preferred stock dividends of $24000. The Company is in the 40% tax bracket. a. Compute the following and explain their meaning: 1- Degree of Operating Leverage (DOL). 2- Degree of Financial Leverage (DFL). 3- Degree of Total Leverage (DTL). b. If XYZ company’s Earnings Per Share (EPS) is currently $7.2, estimate its EPS in case of a 10% increase in earnings before interest and tax (EBIT).
Course: Costs and Budgeting - Equilibrium Point ABC has generated an investment of $500,000 with its shareholders and wishes to achieve a pre-tax return of 30% for this period. Its variable costs are $30 per unit, selling price is $80 per unit and fixed costs are $50,000. How much does the company have to sell to reach the profit projected by the shareholders?
Edmonds Industries is forecasting the following income statement: Sales Operating costs excluding depreciation & amortization EBITDA Depreciation and amortization EBIT Interest $6,000,000 3,300,000 $2,700,000 300,000 $2,400,000 480,000 EBT $1,920,000 Taxes (25%) 480,000 $1,440,000 Net Income The CEO would like to see higher sales and a forecasted net income of $2,720,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 6%. The tax rate, which is 25%, will remain the same. (Note that while the tax rate remains constant, the taxes paid will change.) What level of sales would generate $2,720,000 in net income? Round your answer to the nearest dollar, if necessary. $
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Assume the Hiking Shoes division of the Simply Shoes Company had the following results last year (in thousands). Management's target rate of return is 10% and the weighted average cost of capital is 30%. Its effective tax rate is 40%. Sales Operating income Total assets Current liabilities What is the division's Residual Income (RI)? OA. $100,000 O B. $4,400,000 Ⓒ C. $700,000 O D. $280,000 $11,000,000 1,100,000 4,000,000 780,000
Please, use these formulas that are in the image only. XYZ company expects in the coming year: sales of 40000 units at $10 per unit, variable operating costs of $4 per unit, fixed operating costs of $30000, interest of $50000, and preferred stock dividends of $24000. The Company is in the 40% tax bracket. a. Compute the following and explain their meaning: 1- Degree of Operating Leverage (DOL). 2- Degree of Financial Leverage (DFL). 3- Degree of Total Leverage (DTL). b. If XYZ company’s Earnings Per Share (EPS) is currently $7.2, estimate its EPS in case of a 10% increase in earnings before interest and tax (EBIT).
10. Use the information below provided by Angel Baby Angel Company: Sales 8,250,000.00 Operating costs 4,725,000.00 Operating income 3,525,000.00 Interest expense 1,750,000.00 Earnings before taxes 1,775,000.00 Taxes (40%) 621,250.00 Net income 1,153,750.00 WACC = 8%, Total invested capital 24,875,000. Calculate the EVA. (2 decimal places) Refer to Angel Baby Angel Company, what is its TIE ratio? Use 4 decimal places in your final answer.
5 Edmonds Industries is forecasting the following income statement: Sales Operating costs (excl. Depr. & Amort.) EBITDA Depreciation EBIT Interest EBT Taxes (40%) Net income $10,000,000 5,500,000 4,500,000 1,200,000 $ 3,300,000 500,000 $ 2,800,000 1,120,000 $ 1,680,000 The CEO would like to see higher sales and a forecasted net income of $2,100,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 6%. The tax rate, which is 40%, will remain the same. (Note that while the tax rate remains constant, the taxes paid will change.) What level of sales would generate $2,100,000 in net income?

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