TOPIC 3: LEVERAGE & CAPITAL STRUCTURE FANSA manufactures high quality zippers for designer handbags and luggage. The wholesale price of each zip is $5.00, the operating cost per zip is $2.80, while total fixed operating costs are $40,000 per year. FANSA pays $10,400 interest and preferred dividends of $6,000 per year. The company currently sells 35,000 zippers per year and is taxed at a rate of 30%. a. Calculate FANSA’s operating breakeven point. b. On the basis of the firm’s current sales of 35,000 units per year and its interest and preferred dividend costs, calculate its Earnings Before Interest and Taxes (EBIT) and Earnings Available for Common Stockholders (EACS).
TOPIC 3: LEVERAGE & CAPITAL STRUCTURE FANSA manufactures high quality zippers for designer handbags and luggage. The wholesale price of each zip is $5.00, the operating cost per zip is $2.80, while total fixed operating costs are $40,000 per year. FANSA pays $10,400 interest and preferred dividends of $6,000 per year. The company currently sells 35,000 zippers per year and is taxed at a rate of 30%. a. Calculate FANSA’s operating breakeven point. b. On the basis of the firm’s current sales of 35,000 units per year and its interest and preferred dividend costs, calculate its Earnings Before Interest and Taxes (EBIT) and Earnings Available for Common Stockholders (EACS).
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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TOPIC 3: LEVERAGE & CAPITAL STRUCTURE
FANSA manufactures high quality zippers for designer handbags and luggage. The wholesale price
of each zip is $5.00, the operating cost per zip is $2.80, while total fixed operating costs are $40,000
per year. FANSA pays $10,400 interest and preferred dividends of $6,000 per year. The company
currently sells 35,000 zippers per year and is taxed at a rate of 30%.
a. Calculate FANSA’s operating breakeven point.
b. On the basis of the firm’s current sales of 35,000 units per year and its interest and preferred
dividend costs, calculate its Earnings Before Interest and Taxes (EBIT) and Earnings
Available for Common Stockholders (EACS).
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