Question:Your company wants to expand and it will cost $100,00.Your current sales are $1 million and your sales growth is12%. If you expect no increase in expenses, can youexpand next year?a) No, your increase in sales will not cover the expense.b) No, your expansion costs will go up.c) Yes, your increase in sales will cover the expense.d) Yes, your expansion costs will go down.

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Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter4A: Nopat Breakeven: Revenues Needed To Cover Total Operating Costs

Section: Chapter Questions

Problem 1EP

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Finally, assume that the new product line isexpected to decrease sales of the firm’s otherlines by $50,000 per year. Should this be considered in the analysis? If so, how?
You are preparing to produce some goods for sale. You will sell them in one year and you will incur costs of $79,000 immediately. If your cost of capital is 7.2%, what is the minimum dollar amount you need to sell the goods for in order for this to be a non-negative NPV? The minimum dollar amount is $ (Round to the nearest dollar) COO
K You own a wholesale plumbing supply store. The store currently generates revenues of $1.01 million per year. Next year, revenues will either decrease by 9.6% or increase by 4.9%, with equal probability, and then stay at that level as long as you operate the store. You own the store outright. Other costs run $870,000 per year. There are no costs to shutting down; in that case you can always sell the store for $520,000. What is the business worth today if the cost of capital is fixed at 10.4% ? (Hint: Make sure to round all intermediate calculations to at least four decimal places.) HIID What is the business worth today if the cost of capital is fixed at 10.4%? Today the business is worth $ (Round to the nearest dollar.)
You are preparing to produce some goods for sale. You will sell them in one year and you will incur costs of $89,000 immediately. If your cost of capital is 6.9%, what is the minimum dollar amount you need to sell the goods for in order for this to be a non-negative NPV? $______________ (Round to the nearest dollar.)
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You are upgrading to better production equipment for your firm's only product. The new equipment will allow you to make more of your product in the same amount of time. Thus, you forecast that total sales will increase next year by 25% over the current amount of 96,000 units. If your sales price is $19 per unit, what are the incremental revenues next year from the upgrade? The incremental revenues are $ (Round to the nearest dollar.)
Answer the following lettered questions on the basis of the information in this table: Amount of R&D, $ Millions Expected Rate of Return on R&D, % $ 10 16 20 14 30 12 40 10 50 8 60 6 Instructions: Enter your answer as a whole number. a. If the interest-rate cost of funds is 8 percent, what is this firm's optimal amount of R&D spending? million %24
ou are preparing to produce some goods for sale. You will sell them in one year and you will incur costs of $ 76,000 immediately. If your cost of capital is 7%. What is the minimum dollar amount you need to sell the goods for in order for this to be a non-negative NPV? Question content area bottom Part 1 The minimum dollar amount is $XXX enter your response here .
You are upgrading to better production equipment for your firm's only product. The new equipment will allow you to make more of your product in the same amount of time. Thus, you forecast that total sales will increase next year by 23%over the current amount of 103,000 units. If your sales price is $19 per unit, what are the incremental revenues next year from the upgrade? The incremental revenues are $__________.(Round to the nearest dollar.)
2. Company XYZ sells CDs. The price of its new CD is $15. Fixed costs are $1,500,000 per year. Variable costs are $9. The company expects to sell 300,000 units this year. a. How many DVDS will the company need to sell to break even? b. If the forecasts are correct, how much will company XYZ make or lose this year (before taxes)?
Al_Tech plc is considering investing in a new company, New_tech plc. It has estimated that the new tech company will cost £440,000. Cash flows from increased sales will be £160,000 in the first year. These cash flows will increase by 5% every year. Al_Tech plc estimates that New_tech plc will lose all its technological advantages in five years from now and will lose all its value. Assume that the initial cost is paid now, and all the revenues are received at the end of each year. The company requires a 12% p.a. return for such an investment. a) Calculate the NPV of the investment project. b) Calculate the profitability index and the discounted payback period. c) Should Al_Tech plc consider investing in New_tech plc? What can you say about the internal rate of return to that project? Explain. d) Explain why it is theoretically correct to assume that accepting a project with a positive NPV should increase the value of a company by the NPV of the project.
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