Opereting income? Accounting question Shorter Company had originally expected to earnoperating income of $130,000 in the coming year.Shorter's degree of operating leverage is 2.4. Recently,Shorter revised its plans and now expects to increasesales by 20% next year.What is the percent change in operating incomeexpected by Shorter in the coming year?

Step 1: Definition of Degree of Operating Leverage (DOL)The Degree of Operating Leverage (DOL)…

Answered: Shorter Company had originally expected…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 20P

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Suppose the company has just the opposite news and now expects unit sales for August, September, and October to be double (200%) the original estimates. What effect will this have on the company’s net income and borrowing? Explain your findings.
Shorter Company had originally expected to earn operating income of $130,000 in the coming year. Shorter's degree of operating leverage is 2.4. Recently, Shorter revised its plans and now expects to increase sales by 20% next year. What is the percent change in operating income expected by Shorter in the coming year?
MID company had originally expected to earn
Data on Wentz Inc. for last year are shown below, along with the payables deferral period (PDP) for the firms against which it benchmarks. The firm's new CFO believes that the company could delay payments enough to increase its PDP to the benchmarks' average. If this were done, by how much would payables increase? Use a 365-day year. Cost of goods sold = $74,000 Payables = $5,000 Payables Deferral Period (PDP) = 24.66 Benchmark Payables Deferral Period = 34.00 Please explain process and show calculations.
Jim's Espresso expects sales to grow by 10.3% next year. Jim's changes its payout ratio from 90% to 75% of net income next year. When the payout ratio was 90%, there was excess financing in the amount of $4,199. Jim's developed the pro forma financial statements given here LOADING... to reflect the change in the payout ratio to 75%. How will the net new financing change? The Tax Cuts and Jobs Act of 2017 temporarily allows 100% bonus depreciation (effectively expensing capital expenditures). However, we will still include depreciation forecasting in this chapter and in these problems in anticipation of the return of standard depreciation practices during your career. Income Statement Sales $228,078Costs Except Depreciation (109,781)EBITDA $118,297Depreciation (6,574)EBIT $111,723Interest Expense (net) (474)Pretax Income $111,249Income Tax (38,937)Net Income $72,312 Balance Sheet Assets Cash and Equivalents $16,446Accounts Receivable…
A product has sales of $7M this year, but sales are expected to decline at 10% per year until it is discontinued after year 5. If the firm’s interest rate is 15%, calculate the PW of the revenues.
Jim's Espresso expects sales to grow by 10.4% next year. Assume that Jim's pays out 85.9% of its net income. Use the following statements LOADING... and the percent of sales method to forecast: a. Stockholders' equity b. Accounts payable The Tax Cuts and Jobs Act of 2017 temporarily allows 100% bonus depreciation (effectively expensing capital expenditures). However, we will still include depreciation forecasting in this chapter and in these problems in anticipation of the return of standard depreciation practices during your career. Income Statement Sales $205,430Costs Except Depreciation (99,920)EBITDA $105,510Depreciation (6,070)EBIT $99,440Interest Expense (net) (570)Pretax Income $98,870Income Tax (34,605)Net Income $64,265 Balance Sheet Assets Cash and Equivalents $14,920Accounts Receivable 2,010Inventories 3,950Total Current Assets $20,880Property, Plant and Equipment 10,070Total Assets $30,950 Liabilities…
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A company is thinking of investing in one of two potential new products for sale. The projections are as follows: Year Revenue/cost £ (Product A) Revenue/cost £ (Product B)0 (150,000) outlay (150,000) outlay 1 24,000 12,0002 24,000 25,3333 44,000 52,0004 84,000 63,333 1.Calculate the payback period for both products in years and months, not as a decimal. Please present answer to nearest half a month.
Austin Grocers recently reported the following 2018income statement (in millions of dollars): For the coming year, the company is forecasting a 25% increase in sales, and it expects thatits year-end operating costs, including depreciation, will equal 70% of sales. Austin’s taxrate, interest expense, and dividend payout ratio are all expected to remain constant.a. What is Austin’s projected 2019 net income?b. What is the expected growth rate in Austin’s dividends?
Q.2) Laraby Company produces a single product. It sold 25,000 units last year with the following results. Sales Variable costs Fixed costs 625,000 375,000 150,000 100,000 45,000 55,000 Income before taxes Income taxes (45%) After-tax profit In an attempt to improve its product, Laraby's managers are considering replacing a component part that costs $2.50 with a new and better part costing $4.50 per unit during the coming year. A new machine would also be needed to increase plant capacity. The machine would cost $18,000 and have a useful life of 6 years with no salvage value. The company uses straight-line depreciation on all plant assets.
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