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Summit Electronics has $5,000,000 in sales. Fixed costs are $200,000 and variable costs represent 60% of sales. The company has $2,000,000 in debt with a before-tax cost of 8%. If Summit Electronics' sales were to increase by 15%, what would be the percentage increase in the company's net income? a. 15.50% b. 18.75% c. 17.32% d. 19.23% e. 16.90%

Summit Electronics has $5,000,000 in sales. Fixed costs are $200,000 and variable costs represent 60% of sales. The company has $2,000,000 in debt with a before-tax cost of 8%. If Summit Electronics' sales were to increase by 15%, what would be the percentage increase in the company's net income? a. 15.50% b. 18.75% c. 17.32% d. 19.23% e. 16.90%

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Summit Electronics has $5,000,000 in sales. Fixed costs are $200,000 and variable costs represent 60% of sales. The company has $2,000,000 in debt with a before-tax cost of 8%. If Summit Electronics' sales were to increase by 15%, what would be the percentage increase in the company's net income? a. 15.50% b. 18.75% c. 17.32% d. 19.23% e. 16.90%
Transcribed Image Text:Summit Electronics has $5,000,000 in sales. Fixed costs are $200,000 and variable costs represent 60% of sales. The company has $2,000,000 in debt with a before-tax cost of 8%. If Summit Electronics' sales were to increase by 15%, what would be the percentage increase in the company's net income? a. 15.50% b. 18.75% c. 17.32% d. 19.23% e. 16.90%
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