Problem 11-9 Calculating Break-Even [LO3]A project has the following estimated data: Price = $54 per unit; variable costs = $34 perunit; fixed costs = $17,000; required return = 15 percent; initial investment = $30,000; life= five years.a. Ignoring the effect of taxes, what is the accounting break-even quantity? (Do notround intermediate calculations and round your answer to 2 decimal places, e.g.,32.16.)b. What is the cash break-even quantity? (Do not round intermediate calculations andround your answer to 2 decimal places, e.g., 32.16.)c. What is the financial break-even quantity? (Do not round intermediate calculationsand round your answer to 2 decimal places, e.g., 32.16.)d. What is the degree of operating leverage at the financial break-even level of output?(Do not round intermediate calculations and round your answer to 3 decimalplaces, e.g., 32.161.)a. Accounting break-even quantityb. Cash break-even quantityc. Financial break-even quantityd. DOL

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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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Problem 8-32 Equivalent Annual Cost (LO4) A precision lathe costs $10,300 and will cost $21,500 a year to operate and maintain. If the discount rate is 12% and the lathe will last for 6 years, what is the equivalent annual cost of the tool? (Enter your answer as positive value. Round your answer to the nearest cent.) The equivalent annual cost $
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use excel/show all excel formulas answering the following LO3 20. Sensitivity Analysis We are evaluating a project that costs $1.68 million, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 90,000 units per year. Price per unit is $37.95, variable cost per unit is $23.20, and fixed costs are $815,000 per year. The tax rate is 21 percent, and we require a return of 11 percent on this project. a. Calculate the base-case cash flow and NPV. What is the sensitivity of NPV to changes in the sales figure? Explain what your answer tells you about a 500-unit decrease in projected sales. b. What is the sensitivity of OCF to changes in the variable cost figure? Explain what your answer tells you about a $1 decrease in estimated variable costs. LO3 21. Scenario Analysis In the previous problem, suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to…
Problem 10-3 Sensitivity Analysis (LO2) A project currently generates sales of $5.3 million, variable costs equal to 50% of sales, and fixed costs of $2.1 million. The firm's tax rate is 35% What are the effects of the following changes on after-tax profits and cash flows? a. Sales increase from $5.3 million to $8.3 million (Round your answers to 3 decimal places. Enter your answers in millions of dollars) After-tax profits After-tax cash flow by by After tax profits After-tax cash flow b. Variable costs increase to 59% of sales (Round your answers to 3 decimal places. Enter your answers in millions of dollars.) milion million bry by million million
QUESTION 3 Project Year 0 Year 1 Year 2 Year 3 A -$200 $100 $100 $100 B -$300 $175 $125 $125 Based on the payback rule, which of the following is false? With a payback cutoff of 1.5 years, both projects are unacceptable. You would be indifferent between the two projects. With a payback cutoff of three years, both projects are acceptable. With a payback cutoff of one year, neither project is acceptable. Since both projects pay back, the NPV of both must be positive.
Q3 7a 7. XYZ Co. is evaluating whether to invest in a project with the following information: Project cost = $950,000 Project life = five years Projected number of units sold per year = 10,000 Projected price per unit = $200 Projected variable cost per unit = 150 Fixed costs per year = $150,000 Required rate of return = 15% Marginal tax rate = 35% Assume straight-line depreciation to zero over five years, and ignore the half-year rule for accounting for depreciation. a. Calculate the cash break-even sales quantity for this project.
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Problem 8-23 Profitability Index (LO3) Consider the following projects: Co C₁ -$ 2,450 +$ 2,350 -2,450 +1,790 Project A B a. Calculate the profitability index for A and B assuming a 23% opportunity cost of capital. Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Project A B C₂ +$ 1,550 +1,798 Profitability index ооо b. According to the profitability index rule, which project(s) should you accept? Project A Project B Both ONeither
2:38 d ces The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,955,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 18%. The project would provide net operating income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed. out-of-pocket costs $750,000 591,000 $ 2,865,000 1,015,000 1,850,000 Depreciation Total fixed expenses Net operating income Click here to view Exhibit 128-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Profitability index 1,341,000 $ 509,000 Foundational 12-5 (Algo) 5. What is the profitability index for this project? (Round your answer to 2 decimal places.)
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