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Estimate the value of the firm

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Reference no: EM132546344

1.Cobalt Industries had sales of 143,600 units at a price of $10.43 per unit. It faced fixed operating costs of $256,000 and variable operating costs of $4.93 per unit. The company is subject to a tax rate of 38% and has a weighted average cost of capital of 8.1 % Calculate?Cobalt's net operating profits after taxes? (NOPAT?), and use it to estimate the value of the firm.? (Assume the? firm's earnings are not? growing.)

?Cobalt's NOPAT is ?$____

2.Integrative-Leverage and risk Firm R has sales of 97,000 units at $1.99 per? unit, variable operating costs of$1.73 per? unit, and fixed operating costs of $6,060. Interest is $10,070 per year. Firm W has sales of 97,000 units at $2.56 per? unit, variable operating costs of $0.98 per? unit, and fixed operating costs of $62,400. Interest is $17,300 per year. Assume that both firms are in the 40% tax bracket.

a. Compute the degree of? operating, financial, and total leverage for firm R.
b. Compute the degree of? operating, financial, and total leverage for firm W.
c. Compare the relative risks of the two firms.
d. Discuss the principles of leverage that your answers illustrate.

3.Integrative-Multiple leverage measures Play-More Toys produces inflatable beach? balls, selling 360,000 balls per year. Each ball produced has a variable operating cost of $0.85 and sells for $1.09. Fixed operating costs are $30,000. The firm has annual interest charges of $6,400?, preferred dividends of $1,500?, and a 26% tax rate.

a. Calculate the operating breakeven point in units.
b. Use the degree of operating leverage? (DOL) formula to calculate DOL.
c. Use the degree of financial leverage? (DFL) formula to calculate DFL.
d. Use the degree of total leverage? (DTL) formula to calculate DTL. Compare this to the product of DOL and DFL calculated in parts ?(b?) and ?(c?).

4.Parker Investments has EBIT of $20,000?, interest expense of $2,980?, and preferred dividends of $4,020. If it pays taxes at a rate of 38%?, what is? Parker's degree of financial leverage ?(DFL) at a base level of EBIT of $20,000??

The degree of financial leverage is____

Reference no: EM132546344

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