Capital structure decisions-key information

Reference no: EM1337147

Elephant Books sells paperback books for $7 each. The variable cost per book is $5. At current annual sales of 200,000 books, the publisher is just breaking even. It is estimated that if the authors' royalties are reduced, the variable cost per book will drop by $1. Assume authors' royalties are reduced and sales remain constant; how much more money can the publisher put into advertising (a fixed cost) and still break even?

A. $600,000
B. $466,667
C. $333,333
D. $200,000
E. None of the above

Reference no: EM1337147

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