Question 4 4. Operating Leverage. Natural Bodyworks (NB) produces the popular Ab Stretcher that they sell for $200 per unit. NB's total fixed costs (fixed operating costs + depreciation) for the Ab Stretcher are $200,000. Their variable costs are $30 per unit. They are financed entirely by equity and face a 21% corporate tax rate. If sales increase from 4,000 units to 5,000 units, what is the percentage increase in NOI?
Question 4 4. Operating Leverage. Natural Bodyworks (NB) produces the popular Ab Stretcher that they sell for $200 per unit. NB's total fixed costs (fixed operating costs + depreciation) for the Ab Stretcher are $200,000. Their variable costs are $30 per unit. They are financed entirely by equity and face a 21% corporate tax rate. If sales increase from 4,000 units to 5,000 units, what is the percentage increase in NOI?
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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Transcribed Image Text:Question 4
4. Operating Leverage. Natural Bodyworks (NB) produces the popular Ab Stretcher
that they sell for $200 per unit. NB's total fixed costs (fixed operating costs +
depreciation) for the Ab Stretcher are $200,000.Their variable costs are $30 per
unit. They are financed entirely by equity and face a 21% corporate tax rate. If sales
increase from 4,000 units to 5,000 units, what is the percentage increase in NOI?
Question 5
5. Break-even point. NB's managers are concerned about the operating leverage of
the Ab Stretcher project. Next year's forecast sales are 3,500 units and they would
like to know if The Ab Stretcher will be profitable at this sales level.
The annual depreciation for the Ab Stretcher project is $100,000. Sales price is
$200 per unit and variable cost per unit is $30. Fixed operating costs are $100,000
per year and the tax rate is 21%.
What is the break-even point?
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